Wal-Mart banks on large distribution centres in online push

Wal-Mart Stores' expanding network of large distribution centres will allow it to deliver packages throughout the United States in two days, setting it up to compete more efficiently in online Christmas sales, according to a senior executive.

Competition with online rivals including Amazon.com which recently surpassed it in market value, has heated up and Wal-Mart has committed as much as US$1.5 billion this year to invest in e-commerce.

Much of that is going into large-scale warehouses dedicated to fulfilling online orders. It now has five such facilities, from which it says it will be able deliver to 95 per cent of the country in two days.

The facilities - some big enough to house two cruise liners - will enable it to receive, sort and ship packages faster and at a lower cost, said Michael Bender, chief operating officer of global e-commerce.

Bender was speaking after an event to mark the opening of one of the new warehouses.

The 1.2 million square feet facility outside Atlanta will cost about US$100 million to build, and act as a hub for surrounding states, he said.

He noted that, among other changes, the company may no longer need to rent warehouse space to keep up with the influx of goods during the holiday as it previously did.

"We won't have to do that as much anymore, if at all."

In addition to scale, the Atlanta facility features a number of technological advances which Wal-Mart believes will help it to process packages more quickly and cut costs.

Algorithms help to determine what products should be routed through the facility, while workers use mobile technology to store, scan and pick items, which are moved over a sophisticated maze of conveyor lines. Software automatically tells workers which cardboard box to use to best fit a multi-product order.

Bender said the new facilities would lead to more consolidated orders, meaning customers that order multiple items get them in one box at the same time, cutting down on instances when items are delivered separately from different hubs.

More big warehouses are in the offing, with Wal-Mart announcing plans to build two more new e-commerce facilities in Florida. In addition, it fulfils online orders from dozens of distribution centres and about 80 stores.

Wal-Mart will unveil investment plans for the next fiscal year at an annual investor meeting. While declining to disclose specifics, Bender said that the board and executives remained "focused on helping the e-commerce business grow".