Dive Brief:
- Walmart's third-party fulfillment arm went through 500% growth in gross merchandise volume last year, according to Jaré Buckley-Cox, vice president of Walmart Fulfillment Services.
- Buckley-Cox said in a company blog post that Walmart expects "robust growth to continue" after launching the service for its marketplace sellers "from scratch" roughly two years ago.
- Buckley-Cox added that many sellers using WFS experienced 50% sale growth for items. The executive also noted that the program had a 90% retention rate helped in part by Walmart's Preferred Carrier Program, launched last year and which saves sellers on inbound transportation costs.
Dive Insight:
On a conference call in February, Walmart Chief Financial Officer Brett Biggs said that expanding WFS has been key in "bringing more sellers to Walmart's marketplace."
The company has been, and plans to continue, building out its fulfillment capacity. The goal for Walmart, along with creating a new revenue source from sellers, is to increase its online assortment. To that end, Biggs said that Walmart expects to have over 200 million items in its e-commerce assortment by the end of the year.
As a side benefit, the fulfillment service gives a boost to Walmart's burgeoning advertising business, which topped $2 billion last year.
As John Furner, CEO of Walmart U.S., explained on the call, expansion in WFS allows sellers to transact more with the retailer's online customers. "And that's really the key to the growth of advertising, is a large seller and supplier base that can reach our customer base," Furner said.
Last year, Walmart added about 20,000 new sellers to its U.S. marketplace. The retailer is trying to entice new sellers into using its service with incentives, namely free storage and a 10% discount on fulfillment for the first 90 days for those who sign up before May.
It's hard not to compare WFS to FBA — Fulfillment By Amazon.
Amazon got a head start years ago building out a massive logistics network to sell fulfillment services to the millions of sellers who use amazon.com as a platform. And Amazon continues building on its fulfillment business — which is a revenue generator but also a major cost for the e-commerce giant. For 2021, the company spent $75.1 billion on fulfillment.
WFS is just one of a growing suite of supply chain and other services Walmart is offering to third parties. Last year, Walmart launched GoLocal, a white-label delivery service for other retailers. Among its clients are Home Depot and Chico's, which tapped Walmart for same-day delivery for the apparel retailer's customers, as well as smaller retailers.
CEO Doug McMillon said the company has nearly 1,000 GoLocal pickup pickup points and expects to end this year with 5,000.
