Walmart Boasts ‘Nearly 40 Percent’ Cuts in Delivery Costs
Walmart’s automation push is paying off.
In Walmart U.S., more than 45 percent of the retail giant’s e-commerce fulfillment center volume is now automated, with roughly 1,800 stores receiving some level of freight from 15 regional distribution centers that are in varying stages of automation implementation.
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“As a result, our supply chain teams are processing more units through our DCs and FCs,” said John David Rainey, executive vice president, chief financial officer at Walmart. “And while we’re spending more on capex than we have historically, we’re pleased with the returns from these investments, particularly the automation of our supply chain.”
By the end of 2024, Walmart expects about 3,000 of its 4,600 total U.S. stores to receive deliveries from the automated facilities.
“The ability for a store to get a load in that is palletized is so helpful. As we build more density in these [fulfillment] centers, not only is it by aisle, in many cases it’s by section when an associate needs to stock a pallet. I remember working in stores years ago and it was a bit of a treasure hunt to try to find the items you needed, the cases you needed,” said John Furner, president and CEO, Walmart U.S., who noted that the combination of automated fulfillment and in-store location technology “makes it much easier for our associates to access inventory and get those things in front of people.”
Delivery costs are getting sliced at a high pace as well, which is helping to narrow global e-commerce losses, notably in the Walmart U.S. and Flipkart businesses. According to Rainey, net delivery costs per order have been cut nearly 40 percent year over year.
While in-store pickup is growing at a faster rate than Walmart’s in-store or Sam’s Club sales, deliveries are accelerating even faster than pickup, CEO Doug McMillon said in the call.
Rainey shared another reason for the company’s improvements in delivery, noting that the proximity of stores to customers has enabled faster delivery times.
Store-fulfilled delivery was up about 50 percent in the second quarter, Rainey said, with customers “increasingly choosing and paying for delivery of their e-commerce orders in under one hour or under three hours.”
America’s largest retailer is pouring billions into automation projects to hasten the fulfillment and delivery process, already having opened four “next-gen” distribution centers in Illinois, Indiana, Texas and Pennsylvania. The company also plans to open a fifth high-tech facility to open in Stockton, Calif. by 2026. The fulfillment centers are built to enable next-day and two-day shipping across the U.S. on more products, and double the storage capacity of a traditional Walmart warehouse.
Those warehouses are powered by robotics technologies that focus on the five-step process of unloading, receiving, picking, packing and shipping customer purchases. Automated forklifts that can move pallets of goods are also a major facet of those facilities as part of the company’s partnership with Fox Robotics. Walmart is reportedly investing $200 million in the forklifts.
Beyond its next-gen facilities, Walmart is already retrofitting its 42 regional distribution centers with various automation projects, with the retailer expecting this project to be completed by 2030.
Analysts from Jefferies recently estimated that Walmart could add $20 billion to its profit before interest and taxes by fiscal 2029, largely in part to its efforts in automation and artificial intelligence.
Rainey said generative AI has helped the store-to-home delivery process, saying that “for associates picking online orders, showing them high-quality images of product packaging helps them quickly find what they’re looking for.”
Overall, Walmart saw revenue gains of 4.8 percent to $169.3 billion in its second quarter, with the U.S. business seeing 4.2 percent growth. Net income totaled $4.5 billion.
But a major area of growth for the business has come from its Marketplace and Walmart Fulfillment Services (WFS) segments, which has seen more than 30 percent growth in each of the past four quarters. Growth from sellers using the Marketplace fulfillment services increased 8 percentage points in the second quarter. The company said more than 40 percent of Marketplace sellers leverage WFS, which is Walmart’s analog to Amazon’s Fulfillment by Amazon (FBA) service.
Walmart continues to add new services for its Marketplace sellers, recently unveiling its Walmart Cross Border offering. The service gives sellers that manufacture or source their goods in China full access to Walmart’s ocean freight network.