Exclusive: Wal-Mart to tear down walls between store, online buying operations - sources

[February 14, 2017]  By Nandita Bose

CHICAGO (Reuters) - Wal-Mart Stores Inc <WMT.N> for the first time will combine its own buying for products sold at its stores with purchases it makes for its website, sources said, a significant move to stamp out duplicate efforts as it consolidates buying operations to better fight Amazon.com Inc <AMZN.O>.

Vendors contacted by Wal-Mart about the change told Reuters the store and online buying teams of the world's largest retailer currently operate independently.

Wal-Mart has told some vendors it is seeking to make the buying process more efficient for itself and vendors, and improve coordination between its buying teams. It also wants to apply its bricks-and-mortar expertise in securing the lowest possible prices to its e-commerce business, according to the vendors, who spoke over the last few days. They declined to be identified for fear of disrupting business relations with Wal-Mart.

The move is part of a broader push by Chief Executive Doug McMillon and new e-commerce chief Marc Lore to narrow the gap with Amazon and boost Wal-Mart's competitive standing in U.S. e-commerce. Lore, who joined Wal-Mart when it purchased the company he founded, Jet.com, last year, has been charged with revitalizing Wal-Mart's online business and has introduced changes such as free-two day shipping.

The company has told vendors it plans to disclose the change at a meeting with suppliers later this week, the vendor sources said.

Wal-Mart spokesman Lorenzo Lopez on Monday would say only that the company wants to create "a more efficient process that accelerates how we bring the full assortment of products in stores to Walmart.com." He did not elaborate. The company expects Walmart.com's buying team to focus on expanding the online assortment, Lopez said.

Going forward, Wal-Mart's store buying team based at Bentonville, Arkansas, headquarters will place combined store and Web orders with suppliers who sell on both platforms. Under the new system, an item available for sale in the store will also be approved for sale online, the sources added.

"The way it operated until now was extremely inefficient for us and them," a large consumer goods supplier told Reuters. "For example, they would buy 5 million cases a year for stores and 500 cases (for) online and then make us go through a different buyer for online. It was a nuisance."

A customer pushes a shopping cart at a Walmart store in Chicago,Illinois, U.S. November 23, 2016. REUTERS/Kamil Krzaczynski

Wal-Mart's buying team in San Bruno, California, will still deal with suppliers that make products that sell only on Walmart.com, the vendors said. Store suppliers who have items they sell exclusively online will also have to go through San Bruno, they added.

The strategy is designed to leverage Wal-Mart's powerful Bentonville purchasing operation, where dozens of vendors have set up offices solely to facilitate sales to Wal-Mart.

The move will also help Wal-Mart make items at its nearly 4,600 U.S. stores available online. Many store suppliers still do not sell online because of low sales volumes, the sources said.

Wal-Mart has been trying to expand its online assortment. It grew from 8 million items at the start of 2016 to more than 20 million items at the end of last year. This compares with more than 300 million items available on Amazon.

The joint buying operation is also designed to address the dichotomy in which suppliers who focused on demands from Wal-Mart's traditional store buyers paid less attention to their online counterparts.

"It is hard to make their online buyers a priority. I would get to them when I had a chance," another large consumer products supplier said.

(Reporting by Nandita Bose in Chicago; Editing by David Greising and Matthew Lewis)

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