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Walmart (WMT) Ups the Ante Against Amazon in Tower War

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Walmart Inc. (WMT - Free Report) recently announced that it will be adding 500 Pickup Towers to its U.S. stores by the end of 2018. Understandably, this is in a move to stay in the retail race and compete with Amazon.com, Inc. (AMZN - Free Report) , which has changed the retail landscape over the last few years.

Pickup Towers help customers collect their online orders from tall kiosks inside Walmart stores. Given that Walmart is primarily a brick-and-mortar giant, the company is playing to its strength, much like Amazon is making use of its strong delivery arm to win customer loyalty.

Although Amazon has a similar service, Amazon Lockers, Walmart certainly has an edge over the e-commerce behemoth given that it has more physical stores. And more Pickup Towers will only help the company in luring a greater number of customers. Amazon, in the last few years, has redefined the retail space, tapering the gap between online and offline. Walmart’s decision to add more towers in its stores is another instance of other retail giants following in Amazon’s footsteps.

Walmart Pickup Towers to Boost Online Sales

Walmart is trying to compete with Amazon by offering discounts on its online products only if customers pick up the goods from stores instead of having them shipped to their homes. Naturally, the decision to add 500 Pickup Towers is aimed at increasing online sales. The company introduced Pickup Towers in 2017. Pickup Towers allow customers to order online and then pick up their orders from these 16-feet-tall orange vending machines inside Walmart Stores.

Already, Walmart has 200 Pickup Towers and the idea of adding 500 more comes after the company witnessed more than 500,000 orders being sent to the towers. Walmart believes that the expansion will give 40% of the country’s population access to Pickup Towers by the end of 2018. Understandably, Walmart is getting mileage out of its key strength, its well-distributed brick-and-mortar stores across the country.

Walmart will also be debuting Pickup Lockers inside its towers, which will store expensive and fragile purchases like televisions, for safety reasons. Moreover, Walmart has another concept similar to Pickup Towers in mind. For this, it has entered into a partnership with Alphabet Inc. (GOOGL - Free Report) , wherein customers will be able to place orders using Google’s voice-activated digital assistant. 

Amazon on the other hand only has Whole Foods stores, which it acquired for a whopping $13.7 billion in 2017, to bank on for this line of expansion. So Walmart certainly will have an advantage over Amazon in this regard.

That said, the expansion is a strategic move, wherein Walmart will be able to stay in the retail race by embracing technology and e-commerce and at the same time cut down on costs. For Walmart, shipping products to its stores will cost a lot less than using its fleet of more than 6,700 delivery trucks to drop packages at individual homes.

Amazon Intensifies Competition

Amazon’s strong delivery arm has been its strength and it is giving stiff competition to brick-and-mortar giant Walmart. In February, the company started offering free-two-hour delivery service from Whole Food stores to its Prime members.

Naturally, the idea is to lure more customers on the convenience quotient and the two-hour delivery service has certainly given Amazon enough power to compete with brick-and-mortar giants like Walmart, Target Corporation (TGT - Free Report) , Dollar General Corporation (DG - Free Report) and Dollar Tree, Inc. (DLTR - Free Report) .

And despite not having too many physical stores like Walmart, Amazon is making strategic moves through innovations. Much like Walmart, Amazon has a similar facility, Amazon Lockers, a parcel delivery service, wherein customers can select locker locations as their delivery address and pick up orders.

Moreover, Amazon recently launched its Hub delivery lockers. These lockers can be installed in apartment complexes and customers can pick up their orders from nearby lockers.

While Walmart has a Zacks Rank #3 (Hold), Amazon sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

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