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May 20, 2015

Wal-Mart to take on Amazon as e-commerce market heats up

The retailer plans to invest $1.2bn to $1.5bn on e-commerce this year.

By CBR Staff Writer

Wal-Mart Stores is planning to compete with Amazon in the e-commerce market by utilising its large network of stores as distribution points for online growth.

The company, which is taking a different approach than Amazon, may have to invest more money in distribution centres and other costs to achieve its goal.

The significance of increasing online business is highlighted by Wal-Mart’s sluggish quarterly results.

Following a slight drop in quarterly sales, the company’s worldwide online revenue increased 17% in Q1 ended 30 April. But the spending in e-commerce shaved 2 cents off the company’s earning per share.

Wal-Mart plans to invest $1.2bn to $1.5bn on e-commerce this year. The company aims to open four fulfillment centres.

The company has a network of 4,500 stores. It is using over 80 for distribution, representing a fifth of its online deliveries on a unit basis.

Reuters reported Wal-Mart chief financial officer Charles Holley saying: "We feel like that’s a great advantage that we can leverage."

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He said his response was not specifically related to Amazon.

Wal-Mart booked $12bn in online revenues last year. It is expected to cost between $20m and $40m to convert each conventional distribution centre for handling e-commerce.

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