Dive Brief:

• Walmart is investing $41 million in an e-commerce fulfillment center located in Bullitt County, Kentucky. The center will fulfill orders for Walmart.com and Walmart's subsidiary, Jet.com, according to The Shelby Report. 
• The center is located in a 720,000 square foot building that is being leased by Walmart. Set to open this fall, it will create 400 full-time, part-time, and seasonal jobs. 
• The Kentucky Economic Development Finance Authority preliminarily approved Walmart for up to $3 million in tax incentives. 

Dive Insight:

Walmart has been making aggressive moves towards its e-commerce and specifically towards Amazon. The grocer has been ramping up its click-and-collect service, rolling out new technologies and filing patents for others. Walmart’s new fulfillment center should help the grocer improve its e-commerce distribution channel.

As e-commerce continues to grow, grocers are opening fulfillment centers in order to optimize fulfillment for online picking and packing of products. Recently, Walmart announced it will open a large e-commerce fulfillment center for Jet.com in the Bronx borough of New York City that will enable same-day shipping. Earlier this year, the company announced its closing of 63 Sam’s Club stores that would be converted into e-commerce fulfillment centers. 

Commonly, brick and mortar stores are used for e-commerce fulfillment by grocers. However, as online orders increase, stores may struggle to meet demand, leading many retailers to build dedicated facilities, including dark stores. H-E-B recently announced it will convert an underperforming store in Houston into the city's first e-commerce fulfillment center.

Walmart’s e-commerce has been growing recently, largely driven by the retailer’s curbside pickup, which now serve over a thousand of its stores — surpassing most of its competition. In fact, more than 40% of all click-and-collect consumers identified Walmart as the pickup location for their last order, according to a report by Packaged Facts.

However, only 7.8% of those products purchased through click-and-collect are food and grocery purchases. This shows that Walmart and other retailers have plenty of opportunities to grow its grocery e-commerce business. The retailer’s e-commerce fulfillment centers are one step towards growing that number.

E-commerce makes up only a small percentage of sales, but The Food Marketing Institute and Nielsen estimate the channel will have 70% penetration and be a $100 billion business within the next few years. Although Amazon dominates the e-commerce sector, Walmart is inching up on the company with its expansion of store pickup and home delivery, including its growing same-day service.

Walmart's massive scale — it operates nearly 5,000 stores across the country, and close to 90% of the U.S. population lives within ten miles of a store — will continue to make it a tough competitor. The company’s e-commerce fulfillment center is another warning sign to retailers that it is not just taking e-commerce seriously, but playing to win.