WAL-MART, TARGET, E-COMMERCE IMMEDIACY

Target, Wal-Mart Race to Construct Fulfillment Centers for E-Commerce Business

• By
• Kim S. Nash

Competition in e-commerce has set off a construction race in the physical world. Wal-Mart Stores Inc., Home Depot Inc. are Target Corp., busy building giant new facilities to fulfill ever-growing numbers of online orders.
This quarter Wal-Mart expects to open four such facilities, each more than 1 million square feet:

The new buildings will use both human labor and automation, such as computer-controlled chutes, to move items. The new centers will be part of a network for filling online orders that includes traditional buildings, plus 11 existing smaller e-commerce centers and 83 Wal-Mart Supercenters that have been designated “ship-from-store” locations.

These companies are trying to retool for a retail world where customers demand delivery or pick-up of goods at places most convenient to them. That’s not easy with traditional warehouses, which were built to store pallets of products that are moved by forklifts to and from bays where trucks are loaded and unloaded. An e-commerce facility is fine-tuned for individual items, more like a sorting facility for parcel handling, to be picked and packed for individual shoppers.

Damian Dovarganes/Associated Press

Target expects to spend $1 billion this year to improve supply chain and technology infrastructure, a spokeswoman said. That includes opening two e-commerce fulfillment centers, in Pennsylvania and Tennessee. The company already runs seven e-commerce facilities in six states.
The flurry of activity supports the “speed to guest” metric that Target’s senior executives are measuring — the amount of time between placing and receiving an order.
Filling online orders from stores, not just big regional warehouses, also helps retailers get goods to customers fast. Target ships goods from 140 stores in the U.S., with an average delivery time of two days. The retailer plans to add at least 350 more stores to this network by fall 2015.
Creating fluidity between online and physical stores helps boost sales, said Michael Burgess, president of HBC Digital, the digital technology unit of Hudson’s Bay Co. When shoppers research products on their mobile devices or browse the website, then enter a store, they spend two to four times as much money than if they shopped using only one channel, he said.
Target noted in a recent call with financial analysts that customers picking up online orders in a store also end up shopping there 35% of the time last year.
Wal-Mart is experimenting with providing more pickup locations for its online shoppers, as Tracy Rosser, senior vice president for transportation and supply chain, tells the WSJ’s Logistics Report. Mr. Rosser compared it to a Sonic fast-food restaurant, where customers can specify a pickup time frame, drive to the location, present an order number, collect ordered items and depart.