80-90% of search results on Walmart ship from its warehouses. Over the past few years, Walmart has pushed its third-party sellers to offload fulfillment to Walmart.
For example, a search for “wireless headphones” lists 50 results on the first page. More than half - 33 items - are sold by third-party sellers; Walmart sells the rest. However, 28 out of 33 sellers use Walmart Fulfillment Services (WFS) for fulfillment. Thus, only 10% of the 50 search results are in sellers’ warehouses. The other 90% are either sold by Walmart or sellers but fulfilled by Walmart.
The percentage of search results fulfilled by sellers varies, but directionally it has been increasing across the catalog since Walmart launched WFS in 2020. Before WFS, individual sellers fulfilled most of Walmart’s online assortment since over 90% of its selection comes from the marketplace. By the end of 2021, WFS was already fulling 25% of marketplace sales; that number has increased significantly this year - especially since Walmart invited international sellers, mainly from China.
Over time, Walmart will fulfill most of the search results that most shoppers see. Walmart wants this because it is building a Prime-like membership flywheel called Walmart+. As sellers store more of the catalog in WFS, Walmart+ becomes more valuable because it offers free shipping for those items, incentivizing more sellers to use WFS.
Last year, Amazon was fined nearly $1.3 billion by Italian regulators for tying its marketplace to Fulfillment by Amazon (FBA). The authority said Amazon tied using FBA to a set of exclusive benefits, including the Prime label, that help increase visibility and boost sales on Amazon. Other countries, including the U.S., are judging the same question - whether FBA is an optional service.
FBA hasn’t been an optional service on Amazon for years. Amazon tried growing Seller Fulfilled Prime (SFP), which enabled sellers to offer Prime-enabled products from their warehouses but eventually abandoned it. There are successful sellers on Amazon without FBA; nonetheless, over 90% of the top sellers use FBA.
Walmart is following in Amazon’s footsteps and is tying the marketplace to WFS. The fulfillment service was optional a year ago but is already recommended for many categories and will be all but requisite soon. Walmart states “higher search rankings and Buy Box wins—for a 50% increase in sales, on average” as one of its benefits. “Higher search rankings” already means being on the first search results page or not visible at all.