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Wal-Mart steps up its online game with help from stores

Two people walk outside a Wal-Mart store in Mexico City January 11, 2013. REUTERS/Edgard Garrido
Two people walk outside a Wal-Mart store in Mexico City January 11, 2013. REUTERS/Edgard Garrido

By Jessica Wohl and Alistair Barr

SAN BRUNO, California (Reuters) - Wal-Mart Stores Inc, facing growing competition for quick delivery of physical goods from online retailers like Amazon.com Inc, said on Tuesday it would start using its stores to get Internet orders to customers faster.

While Wal-Mart is the world's largest retailer by overall sales, on the Internet its revenue is a small fraction of Amazon's, adding some urgency to its e-commerce efforts.

Wal-Mart said it would soon test having lockers to hold goods ordered on the Internet in stores until shoppers pick them up. It is also doubling the number of stores that can fill orders placed online, an attempt to match the reach of Amazon's distribution network.

Those tests, along with services such as letting shoppers pay for online orders in stores with cash, are some of the ways Wal-Mart is trying to link its online business with its thousands of stores, executives told reporters at the company's first global e-commerce media day in San Bruno, California.

While Amazon had $61 billion in sales last year, Wal-Mart is on track to surpass $9 billion in annual online sales this year, said Neil Ashe, chief executive of its e-commerce unit.

Until recently, Wal-Mart had not broken out its online sales, but Ashe insisted the company would be able to build a competitive e-commerce business.

LOCKERS COMING THIS SUMMER

Starting this summer, it will put lockers in about a dozen U.S. stores to hold goods ordered online until shoppers pick them up.

Lockers are a growing trend in e-commerce. As more packages turn up on shoppers' doorsteps theft has increased, especially in urban areas, spurring demand for secure places nearby to store them.

Amazon, which has no stores, has installed lockers in grocery, convenience and drug stores for several years. Google Inc acquired a delivery locker start-up called BufferBox in November.

Wal-Mart is also planning a small expansion of a running test to ship online orders from physical stores. In 2013, the company plans to double the program to about 50 stores, a fraction of its nationwide footprint.

Using stores as fulfillment centers that are closer to customers lets Wal-Mart offer same-day delivery and next-day delivery of online orders "at very low cost," said Joel Anderson, chief executive of Walmart.com.

Two-thirds of the U.S. population live within five miles of a Wal-Mart store. That said, the company will likely expand this approach to hundreds of stores rather than thousands.

For example, in the Dallas area, Walmart has more than 100 stores. It would only need two or three of those stores to act as distribution centers to get the financial benefit of this approach, said Jeff McAllister, senior vice president of Walmart U.S. innovations.

The expansion is another part of Wal-Mart's efforts to compete with Amazon's successful Prime subscription service, which provides free two-day shipping in the United States for $79 a year. Another front in that battle is the expansion of what Wal-Mart's website sells.

Product assortment on Walmart.com grew 35 percent to 40 percent to two million items in 2012 and the company plans to double that this year, said Kelly Thompson, a Wal-Mart merchandising executive.

But Wal-Mart's digital efforts are not without growing pains.

The retailer asked reporters who were tweeting comments on Tuesday to use the hashtag #WMTinnovate. Along with tweets from the reporters, #WMTinnovate tweets were being sent from groups and individuals speaking out against the retailer.

The union-backed group Making Change at Walmart posted on Twitter: "@WalmartNewsroom Why don't you start by empowering the women in your stores with equal pay for equal work? #equality #wmtinnovate."

(Reporting by Jessica Wohl and Alistair Barr in San Bruno, California; Editing by Gerald E. McCormick, Steve Orlofsky and Bernard Orr)

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