Why Wal-Mart Stores, Inc. (WMT)’s Locker Program Puts it Ahead of the Competition

Wal-Mart Stores, Inc. (NYSE:WMT) announced today that it will install lockers in a test program whereby customers can make a purchase online and collect their items in a nearby Wal-Mart store.

This service isn’t new. Amazon.com, Inc. (NASDAQ:AMZN) is testing a similar program with Staples and several convenience store chains for a lockers service with same-day pickup. The idea is simple: allow customers to shop online, skip the long lines of retail, and enjoy instant gratification by getting the product the same day the customer places the order.

Why this is a win for Wal-Mart

Wal-Mart Stores, Inc. (NYSE:WMT)’s biggest competitive edge is its scale and distribution advantages. The company operated more than 4,000 stores in the United States as of January 2013. But there’s more to it than that. In fact, as of 2006, the median distance to a Wal-Mart was 4.2 miles.

In short, Wal-Mart is everywhere, and its customers have only a short drive to collect their goods at any one of Wal-Mart’s locations.

Most importantly, Wal-Mart Stores, Inc. (NYSE:WMT) is erasing some of the complications that turn customers away from its deep discounting model. Online shoppers will not have to wait in lines, which are notoriously long at the company’s stores. Secondly, shoppers will enjoy same day pickup without ever speaking to a single Wal-Mart cashier, as the transaction will be handled seamlessly over the internet.

Finally, a lockers system allows Wal-Mart to achieve bolt-on revenue growth. The company will attract more online shoppers into its stores, shoppers who may ultimately decide to do some convenience shopping while in the store. How many times have you gone to a store to return a product or pick up an order only to buy something else on the way out?

That’s what Wal-Mart Stores, Inc. (NYSE:WMT) needs: organic, same store sales growth that can break the company’s ties to the performance of the overall economy.

Amazon should be worried

Wal-Mart’s aggressive entry against Amazon isn’t good for shareholders of this online retailer. In one move, the Bentonville, Arkansas retailer essentially duplicated Amazon’s lockers with potential for distribution far better than Amazon could ever hope to achieve.

Amazon’s lockers system is hinged on the ability to get new contracts with competing retailers and businesses. Wal-Mart already owns the real estate necessary to make an aggressive lockers investment without any contracts or negotiations. The company also has the same potential to expand its service with new contracts with other retailers.