Wal-Mart Using FedEx As Extension Of Its Stores

Wal-Mart, the 8,000-pound gorilla in retail with 4,300 U.S. stores, finds itself in an awkward position in many urban areas—its stores are few, and resistance is strong. One of Wal-Mart's more creative responses to this problem was rolled out Wednesday (Oct. 13): Give E-Commerce customers free shipping (no minimum required) and let them pick up the order at a local FedEx office, which in an urban area is probably a lot closer than a Wal-Mart store.

The program, called FedEx Site to Store (every so often, marketers throw us a curve and go for WYSIWYG naming. PayPal did something similar last week), has been piloted by Wal-Mart for months in Los Angeles and Boston, and this new move sharply expands the trial to New York, San Francisco, Chicago and Washington, D.C.

Wal-Mart also extended a related trial called Pick Up Today, which is little more than a modification of buy-online-pickup-instore. For many consumers, it will feel identical, but the difference is that they will be accessing store—instead of online—inventory. Compared with the FedEx approach, this has the advantage of enabling customers to buy other stuff while at Wal-Mart. Sending a customer to a FedEx ship station has no upsell potential.

That's why the "pick up at FedEx" is the more interesting move. By marrying that option with free shipping, Wal-Mart truly is leveraging FedEx's locations as extensions of itself. The retailer gains a local point of presence where city officials won't allow one. Wal-Mart is likely making sales where it wouldn't have otherwise. And there's an excellent chance that many of those shoppers might then migrate to full E-Commerce customers and pay to have items shipped directly to their homes.

Even though this move seems to be clever, the chain couldn't resist pushing its claims a bit. One PR person for the company was E-mailing the following Wal-Mart quote to reporters: "It's worth noting that our Site to Store service has saved customers hundreds of millions in shipping fees since its launch in 2007."

Not necessarily. That statement assumes that all of the site-to-store customers would have placed their orders and paid shipping had the program not existed, as opposed to the more likely scenario that many of them would have simply obtained the ordered item elsewhere or forgotten about it entirely. In that case, they could have saved the purchase price, too!