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Walmart Teams Up With FedEx to Challenge Amazon

- By Mayank Marwah

Walmart (NYSE:WMT) recently announced that it is entering into a partnership with FedEx (NYSE:FDX) in an effort to ease product returns for its online shopping. In the new service, known as Carrier Pickup by FedEx, customers can return products sold and shipped to them by Walmart.com. The company said that the return option is free for customers, and while it's been introduced for the holidays, it would continue beyond the festive season.

Customers who want to return their online purchases can schedule a pickup date and print a label, initiated through either Walmart's website or app. A FedEx associate will pick up the packet. In case customers do not have a printer to create a label, they can generate a QR code from Walmart.com or app. Following this, the package will be taken to a FedEx office, where the QR code will be scanned by an employee. Walmart said that the amount will be refunded to the customers within a day of return, or the same day in case of in-store return. The big box retailer said it would roll out an alternative location within some stores for in-store returns.

Linne Fulcher, Walmart's vice president for customer strategy, science and journeys, commented, "No matter how customers buy items, we want the returns experience to be easy, safe and seamless."

Face-off with Amazon

In other words, Walmart now offers the same convenience of return services for online shopping as Amazon.com Inc. (NASDAQ:AMZN), which permits customers to return products at Whole Foods markets, Kohl's (NYSE:KSS) and UPS stores or lockers within 30 days of delivery without a box or label, free of cost.

Amazon has extended return period for holiday season. Products bought between Nov.1 and Dec. 31 can be returned before Jan. 31 without any cost. Therefore, for Walmart, to come up with a strategic move like this was almost inevitable in order to prevent Amazon from moving further into its market territory.

It's no secret that Amazon's strategy is to establish monopolies in every area it can, which it has been wildly successful at so far due to being the first e-commerce retailer to set up a vast network in the U.S. After it solidified its distribution networks, Amazon then turned its focus to leveraging this advantage by various means, such as coming out with cheaper versions of popular items from its third-party sellers and moving into the grocery space with Amazon Fresh and the Whole Foods acquisition.

The threat to Walmart's territory is clear, and so the discount grocery chain is making sure to match Amazon tit-for-tat in order to avoid losing its market share.

Parting thoughts

Walmart's collaboration with FedEx to provide customers free home pickup of returns reflects the company's strategic move to enhance the online shopping experience and boost its digital sales. Walmart's e-commerce sales growth of roughly 80% in the most recent quarter is a testament to the fact.

Despite being a brick-and-mortar-based store, e-commerce sales is expected to be a major contributor to the company's top and bottom-line in the near future. Given how well Walmart is keeping up with Amazon in this regard, I have confidence that this is one of the few companies that is able to hold its own against the e-commerce behemoth and continue to thrive.

Disclosure: I do not hold any positions in the stocks mentioned.

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This article first appeared on GuruFocus.