Walmart Manages Shipping Costs with New Out-of-Stock Algorithm

The Wall Street Journal reports that Walmart has begun to show some products out-of-stock to shoppers to control shipping costs on large and bulky items.

This new fulfillment algorithm takes into consideration the distance between a shopper’s address and the nearest fulfillment center and the cost of shipping the order.

For bulky or heavy products, such as detergents or pet foods, if the item is too far from the shopper’s address, Walmart.com will show the item out-of-stock and instead make recommendations for similar products.

The system was introduced in August, and apparently caught some suppliers off-guard as their sales on Walmart.com suffered. According to the WSJ report, some vendors were not warned ahead of time about this change in the fulfillment algorithm.

The WSJ further reports that one executive from a food company told them that under the new system, suppliers will have to stock products in more warehouses around the country to maintain their sales.

In a response from Walmart to the WSJ, the company admitted to making this change and said it is a test to try to ship more products by ground delivery instead of more expensive air delivery to meet its promised 2-day delivery window.

Walmart claims this test only applies to some categories such as household cleaners, non-perishable groceries, pet food, and cosmetics.

With this new fulfillment scheme, the company also hopes to consolidate more products into one shipment, instead of having a single order arrive in multiple shipments.

Unlike Amazon, which only guarantees two-day delivery to Prime members, and for which it charges a membership fee of $119, Walmart last year abandoned a similar membership program called ShippingPass.

ShippingPass was Walmart’s original idea to offer guaranteed 2-day shipping for $49 per year. But the company had to backtrack on that program due to a lack of interest, and ended up making the 2-day delivery service available for free to all shoppers.

Since Walmart does not receive additional revenues from a membership program, the company has been trying to find other ways to control shipping expenses.

Implication on Marketplace Sellers?

From the WSJ article, it is unclear if this same fulfillment scheme also applies to marketplace sellers, third-party sellers that use Walmart to sell their products.

The fact there appears to have been a lack of transparency even with its core suppliers, it seems marketplace sellers may be even further in the dark.

With no clarification from the company, is a sudden drop in sales in a product the result of the new “managed fulfillment” method or some other reason?

Sellers won’t exactly know unless Walmart becomes more transparent about this issue to them.

READ MORE: Walmart Lands Bombshell on Marketplace Sellers – In-Store Returns!

Are you a Walmart marketplace seller and have you noticed any strange changes to your sales? Head over to our Facebook Discussion Group or use the comments section below.

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