Walmart steps up competition with Amazon by fulfilling orders for third-party vendors

Key Points
  • Walmart is debuting Walmart Fulfillment Services.
  • Third-party vendors will be able to pay Walmart to store, pack and ship items.
  • The move could speed up deliveries to customers by increasing the number of marketplace items with two-day or next day shipping.
A Walmart package is unloaded from a trailer to be sorted at a FedEx ground hub in Hagerstown, Maryland.
Andrew Harrer | Bloomberg | Getty Images

Walmart is launching a new service that allows third-party vendors to hire the retailer to store, pack and ship items for customers, a move that could better position the big-box retailer to compete against Amazon.

Through Walmart Fulfillment Services, third-party vendors that sell clothing or other items in's marketplace can pay to have the retailer handle the logistics of getting items to a customer's door. They currently have to use a third-party to handle fulfillment or do it themselves.

New and current vendors can sign up for the service starting Tuesday, according to Jare' Buckley-Cox, vice president of Walmart Fulfillment Services. The company launched a pilot of the service a few months ago with a mix of brands across categories, including footwear, apparel and electronics.

Walmart said sellers and customers will benefit from the new service. It said sellers will pay a low fee to store and ship goods and be able to drive up profitability. Customers will have more brands to choose from, faster shipping and easier returns. The company did not say how much it will charge sellers, but said it would be "one of the lowest-priced services on the market."

Walmart is expanding its e-commerce offerings, after having significant growth that's driven by online grocery sales. The company's online sales grew by 37% last year, topping its own internal growth targets of 35%. It's acquired several digital brands, including menswear company Bonobos and outdoor apparel maker Moosejaw, and launched other online-focused brands in-house.

Walmart announced another e-commerce change Tuesday. In a company memo, Walmart executives said they are combining its buyer teams for the website and for stores. Buyers will now be split into merchandising categories, such as food, and they will buy all items in that category regardless of where they're sold.

Hilding Anderson, head of retail strategy for digital consulting firm Publicis Sapient, said offering a fulfillment service for sellers "is table stakes today."

With the service, he said Walmart will have more control over the customer experience. It can increase the number of packages with next-day or two-day delivery. It will have more visibility in warehouses, so it knows if it's running low on an item. It can standardize the quality of packing and shipping, so items don't arrive damaged or broken.

"It's an important move as they compete and compete hard against Amazon and Target and others with a marketplace app," he said.

He said it could also benefit Walmart's bottom line. With Walmart Fulfillment Services, the company can get more out of its extensive network of warehouses and trucks.

Walmart could use its large footprint of stores to attract and increase sales for third-party vendors, too, he said. It could allow items sold by them to be picked up in stores — similar to how it handles online grocery orders.

"I could see that be an interesting next move," he said.

Against a broader drop in the market, Walmart shares closed down nearly 2%. The stock, which has a market value of $324 billion, has gained nearly 16% over the past year.

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