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Chapter 484 Walmart's Response

While Amazon was having a meeting, Walmart wasn't idle either; they were also discussing flash sales.

However, unlike Amazon, which focuses on e-commerce, Walmart has concentrated its main efforts on flash sale delivery services.

Looking at the various bags of snacks and coffee on the table, some people were looking down at the documents in their hands, while others were frowning and deep in thought. The entire conference room was silent, and the air seemed to be filled with anxiety and unease.

The saying goes, "Strike the snake at its vital point," and this flash sale has hit Walmart right where it hurts.

Glass frowned, picked up the coffee cup on the table, and took a sip.

The coffee had long since gone cold, but he seemed completely oblivious.

After a long silence, he broke the silence in the conference room: "Without a doubt, flash sales are stealing our core customer base."

"Housews who want to bring dinner home after get off work every day, and office workers who are too lazy to queue for breakfast—these are Walmart's core customer groups for a long time. Amazon has just implemented a targeted strategy to further squeeze our market share in the e-commerce field, and now flash sales have suddenly appeared, and we..."

At this point, Glass suddenly paused, a hint of confusion flashing in his eyes, as he didn't know what else to say.

He suddenly wondered if Walmart's strategy of vigorously promoting its online mall was a misguided one.

Since the launch of Walmart's online store, its stock price has indeed shown a significant upward trend.

Prior to this, Walmart's stock price had been fluctuating steadily for a long time, and a 5% increase in market value per year was considered a very good achievement.

After the online store was launched, Walmart's stock price rose by more than 10%, a growth rate that was unimaginable in the past.

He knew that this was because of the internet; investors were optimistic about Walmart's development potential in the e-commerce field and believed that Walmart could gain a foothold in this fierce e-commerce competition and carve out its own market.

"Hansen, why don't you tell us about the flash sale situation first?" Glass's voice rang out again.

Paul Hansen typed notes on a bulky laptop, while screenshots of the flash sale were displayed on a large screen at the front of the conference room.

"Remember the wave of retail mergers a while back?" Paul Hansen's voice instantly drew everyone's attention.

Glass remembered that there had been a wave of retail mergers across America recently, but the merged companies were mostly small regional chain stores. In addition, Walmart had focused all its attention on its online store at the time, so it didn't receive much attention.

"Is this related to the current wave of mergers and acquisitions?" Glass asked.

“That’s right.” Paul Hansen nodded. “I logged into Flash Sale’s hourly delivery service page and found that different stores accept orders for different addresses. After further investigation and reviewing some information, I discovered that these stores were all retailers that were involved in the mergers and acquisitions at the time.”

"WShop in the east, Kos in the central region, and Hode in the west are the main players. They have integrated most of the regional community retail stores and some large regional supermarkets through mergers and acquisitions. When consumers place orders through flash sales and hourly delivery, they can choose retail stores under these three companies within a 10-kilometer radius of their delivery address."

"Clearly, this was a premeditated plan. Ernst had already conceived of this food delivery model from the very first day he started preparing for e-commerce. It's just that he wasn't delivering meals, but rather everyday goods from the supermarket."

"The Retail Industry Conference," Glass remembered.

Glass recalled, "No wonder Ernst was so eager to partner with numerous retailers at the last retail conference. I found it quite strange at the time. Logically, developing an e-commerce business should start with partnering with upstream brands to ensure product supply and quality. Now it seems his real purpose was to integrate these retail store resources, laying the foundation for today's flash sale and hourly delivery business."

Paul Hansen, unaware of the specifics of the retail conference, pointed to the coffee and snacks on the table and said, "Ladies and gentlemen, as you can see, these coffees and snacks are items I ordered from a flash sale platform. I specifically noted the time from placing the order to receiving the goods, and it only took 37 minutes."

"This is simply incredible." Even his rival, Paul Hansen, was amazed. "This delivery speed far exceeds the delivery capabilities of our Walmart online store, and is even faster than the self-checkout process in our physical stores."

"What's even more worrying is," Paul Hansen's expression grew even more serious, "that I compared prices and found that these items purchased from the flash sale were cheaper than if we had bought them ourselves in physical stores."

"You're saying that items bought on flash sales are cheaper than those bought in physical stores?" Robert Davis suddenly interjected, his tone full of doubt and disbelief.

Flash sale platforms need to bear the delivery costs, so the prices of their products should be higher than those in physical stores. How could they possibly be cheaper?

Paul Hansen explained, "Because flash sale platforms offer substantial discounts and subsidies, although consumers need to pay a 10% service fee, the final price is still cheaper than in physical stores due to the discounts and subsidies."

A vice president suddenly scoffed, his tone tinged with disdain, "I knew it, they were giving subsidies. This model of attracting users by burning money on subsidies can't last."

After saying that, he looked at everyone and continued, "I don't think Flash Sale's hourly delivery service is a cause for concern. Once the subsidies end, the prices of goods will inevitably rise. Who will still be willing to pay a 10% service fee and choose to shop on Flash Sale? Consumers are rational, and they will ultimately choose shopping channels with higher cost performance."

"Take our Walmart brick-and-mortar stores, for example. They not only have a wide variety of products, but also frequently offer discounts, and the average transaction value has exceeded $210. For consumers, they should choose to shop at Walmart rather than opt for flash sales, just for that 10% service fee."

Many executives nodded in agreement, noting that American consumers have different shopping habits than those in other countries. They typically purchase items needed for five days to a week at a time, resulting in a relatively high average order value.

Once the average order value increases, the 10% service fee will become a significant expense, which will greatly influence consumers' purchasing decisions.

From this perspective, the hourly delivery service of flash sale platforms does indeed face significant obstacles to development.

"But don't forget, Walmart's online store also has additional fees. Although we don't charge a specific delivery fee, we have a minimum purchase amount, and customers need to buy a certain amount of goods to enjoy free delivery. Moreover, our delivery time usually takes 1-3 days, which is a huge difference in timeliness compared to the 30-minute delivery of flash sale platforms," ​​Paul Hansen reminded him.

"That's different. Our online store mainly targets consumers with large purchasing needs. They value the variety and price of goods more and have relatively lower requirements for delivery time."

Paul Hansen took a user survey questionnaire directly from his briefcase and handed it to Glass. "This is a survey questionnaire that I conducted within Walmart an hour ago. The survey respondents were mainly Walmart employees, involving a total of 230 staff members."

"Although the survey sample size is relatively small, it can still reflect consumers' real needs and attitudes to a certain extent."

"The survey results show that 38% of employees said they would be willing to pay 10% more if items purchased from Walmart's online store could be delivered to their homes within an hour."

"You see, most people are still unwilling to spend extra money on this," the vice president said with a hint of pride. "62% of employees are unwilling to pay extra fees, which fully demonstrates that consumers' demand for delivery speed is not as strong as we imagined. The flash sale platform's hourly delivery service only caters to the needs of a small segment of consumers and cannot pose a real threat to Walmart."

Paul Hansen didn't even glance at the vice president, but instead focused his gaze on Glass, saying in a serious tone, "You need to understand, these are Walmart employees. Many of them work in Walmart stores or nearby, and can shop there anytime."

"Under these circumstances, 38% of employees are still willing to pay 10% for delivery within one hour, which reflects a market demand that cannot be ignored."

But upon hearing Paul Hansen's words, Glass's previously relaxed body suddenly stiffened, and his expression turned serious.

If even employees who work and shop conveniently near Walmart are willing to pay extra for fast delivery, what about other consumers?

Wouldn't people who live several kilometers or more away from Walmart or other large shopping malls, or those who are too busy to go grocery shopping, have an even stronger need for fast delivery services? Wouldn't they be more willing to pay extra for these services?

That wasn't all. Paul Hansen continued to drop bombshells, letting the people in the conference room know the seriousness of the problem: "I also discovered that they are carrying out a standardization and normalization reform."

"What do you mean?" Glass asked eagerly.

Paul Hansen pointed again to the unopened and untouched packages on the table. "These are the items I bought on a flash sale platform. I was able to get both Giverny coffee and Karst chicken wings in one order."

"What?" Upon hearing this, not only Glass, but many executives in the conference room showed surprised expressions, which then turned serious.

Giverny coffee is a signature drink of Arkansas and enjoys great popularity locally.

Its coffee has a rich, full-bodied flavor and a strong aroma. It not only tastes better than Starbucks coffee, but it is also one-third cheaper.

Don't underestimate Giverny just because it's a small chain convenience store brand with stores mainly concentrated in densely populated cities. When it comes to sales in the same region, everyone knows without market research that Starbucks would be completely defeated.

Three years ago, Starbucks had considered acquiring Giverny, but the negotiations ultimately fell through.

Because Giverny's coffee costs more than Starbucks', Starbucks acquired it simply to hide the brand and promote its own brand locally.

Giverny's coffee holds great significance for its founder, Dogo Giverny, as it was invented by his late wife. It was this cup of coffee that helped them grow Giverny from a small shop into a retail brand with over 70 stores in more than 20 cities across Arkansas.

Dogo doesn't care how much money he makes; what he wants is to get more people to drink Giverny's coffee through Starbucks' channels, not to get Starbucks shares.

While Karst's roasted chicken wings aren't as famous as Giverny's coffee, they are still very unique. Their roasted chicken series is very popular and has many regular customers.

Especially on match days and holidays, demand far exceeds supply.

The simultaneous acquisition of Giverny and Karst is not surprising, but the fact that Flash Sale allows customers to purchase both products in a single order speaks volumes.

One possibility is that the delivery person picks up the food in two separate trips, but that's unlikely.

Putting aside the issue of personnel costs, we will face a major financial problem.

Since we can buy the specialty products of these two stores, it means that we can also buy the specialty products of other stores. With so many orders, which are spread across various stores, financial settlement is not a simple matter.

Then there's only one possibility: as Paul Hansen said, they're doing standardized production and then distributing it to individual stores.

Coffee can be made into coffee cups according to the recipe, and you can drink it by adding water, while roast chicken can be pre-made and heated at the store.

If this is the case at Giverny and Karst, then it means the other stores are the same.

When these stores all showcase their best offerings, allowing customers to enjoy all the featured dishes they want with a single order, without having to go back and forth between different stores, consumers are absolutely willing to pay the extra 10% service fee.

"Is it possible for us to develop this kind of fast-delivery food delivery business?" Glass asked.

The CFO shook his head and directly rejected the idea: "This isn't about hiring full-time delivery drivers, or factoring in fuel costs and vehicle wear and tear. It's about the fact that Walmart can't be as densely clustered in every neighborhood as those flash sale community stores."

"If we want to achieve the delivery speed of flash sales, we either need to rent various small warehouses in the city or acquire community stores like they do. Either way, the cost will skyrocket. Even without flash sales subsidies, we can't compete with them in terms of delivery costs alone."

The executives fell into deep thought once again. They were all well aware that Walmart faced enormous cost pressures and strategic dilemmas in developing its flash sale delivery business.

However, if Walmart does not take any action in the face of the strong rise of flash sale platforms, it can only watch helplessly as its core customers are snatched away.

"Paul, do you have any ideas?" Glass saw Paul Hansen as a lifeline, hoping to get a solution from him.

"Leverage our strengths and target high-value clients."

Seeing Glass looking over, Paul Hansen continued, "Flash sales' hourly delivery service mainly targets those with urgent shopping needs, and that's their limitation."

"No matter what, those community stores can't compare to our supply chain or product range. We can use this to target high-priced customers and reduce delivery costs by lowering the average order value."

"This way, we don't need to rent small warehouses or acquire community stores; we can just hire riders for deliveries."

"It's okay if it's a little slower. What's wrong with it taking two hours to arrive?"

"The key question is, can we afford to delay, but can we afford to lose money through flash sales?"

"Great idea!" Glass's eyes lit up.

High average order value can maximize the compensation for labor costs, but can flash sales continue to subsidize like this indefinitely?