Reader Ian, who lives in Ottawa, Canada is wondering "How do they do it?" Ian writes ...
Hello MishMike "Mish" Shedlock
Recently I went to WalMart online to price cat litter. An 18 kg box - about 39.7 lb - was $8.98. This is the same as my local WalMart in-store price. But online came with free shipping.
I spoke to the guy who delivered the 2 boxes I ordered. He is an owner-operator of a shipping company that contracts for WalMart delivery. Since he owns his own truck, he has to pay gas, insurance, depreciation, licensing, maintenance, etc.
How much does WalMart pay this guy for delivering an $18 order? How does this delivery provider survive? Is the cost of operating a store be so high that WalMart has enough margin to ship from a warehouse while offering free shipping?
I'm in Ottawa, Canada. I'm not even aware of a warehouse in our city. If there is no warehouse, the litter had to be shipped from a store, with no savings on store overhead.
Even if there is a warehouse, the increased distribution distance means the shipper must be paid more or go out of business.
WalMart seems to be somewhere between a traditional bricks and mortar model and an Amazon model. I don't understand how this works, but I'll use it while it exists, saving time and money.