Walmart's latest Amazon weapon: A 16-foot tower to distribute online orders

After receiving an email on her iPhone, Alicia Grivas of Kennett Square came in to her local Walmart to pick up her online order of two packages of green tea.

It was waiting for her inside a 16-foot-high, 8-foot-wide orange tower, which resembled a giant vending machine holding up to 300 packages.

Grivas scanned the barcode in the email into the tower, which then sent her package down a chute.

"It was easier than I thought," said a smiling Grivas as she opened the compartment and took out her package. The process took less than a minute. "It's here just like they said."

The pickup tower at the Walmart Kennett Square is the first in the Philadelphia area and only the third in Pennsylvania (after Indiana, Pa., and Temple, Pa. just outside of Reading). Across the country, there are 120 pickup towers, which can distribute many items ordered the same day, and will be expanded if customers approve.

"This is an example of leveraging brick-and-mortar locations to support online," said Moody's lead retail analyst Charlie O'Shea. Same-day availability "is tough for pure-play online to match."

It's also the latest salvo by Walmart, the nation's largest retailer by revenue ($500 billion in annual sales) to challenge chief rival Amazon, the online juggernaut (with $120 billion in U.S. online sales), for retail supremacy.

Walmart's U.S. online sales are about a fifth of that at $23 billion annually.

Over the last year, Walmart has been building its digital firepower with the purchase of online companies, including Jet.com and men's clothier Bonobos, while Amazon has been adding to its physical stores by buying up Whole Foods to expand its distribution.

Walmart will be announcing more improvements across Pennsylvania next week, from remodeling stores to accelerating pickup towers, scan-and-go, and online ordering with curbside grocery pickup.

Walmart's Mobile express scan-and-go was launched last month in the 120 stores with towers. Customers can use scanners to scan bar codes on items and bag as they go. Or they can use the scan-and-go app available through iTunes and Google Play. When they're done shopping, they can scan the QR code at the end of their order to pay at specifically designated registers — skipping the check out line.

"I love that you can scan, put in a bag, hit one thing, and go," said Allen Futrell, 45, a high school math teacher from Hamden, Conn., who was here for a book sale and stopped by the Kennett Square Walmart. "I can't wait until Connecticut gets this."

The pickup tower and scan-and-go features make life easier for customers – especially those who still like coming to the store, said Mike Bernhardt, Walmart's e-commerce market coach overseeing in-store pick up and online groceries for the Philadelphia region.

"There is a need and appetite for brick-and-mortar stores," Bernhardt said. This "allows us to have a larger assortment of merchandise."

Morningstar  retail analyst John Brick wrote this month that Walmart's efforts to boost online technology should increase online sales by 30 percent a year over the next three to four years to about 10 percent of sales, up from 3 percent as of fiscal 2017. "With economies of scale and a vast distribution network … we believe Walmart's 11,700 locations [including supercenters, wholesale warehouse clubs, and small-format stores] allow it to play offense in winning these online sales."

Cam Rouvre, 72, of Akron, Pa., came in to pick up a 55-inch Samsung LED screen on Friday – an item too big to place in the pickup tower. It still let Rouvre know that the TV was in the back area of the store ready for pick up  and that the mounting for it was stored in one of nine lockers nearby.

An associate then wheeled the TV to the front entrance as Rouvre pulled up in his Ford pickup truck to load it in the back.

"It's different from walking all the way to the back room to get it," Rouvre said. "It was very fast and convenient. I like it. It saved me a lot of time and I can go right back to work."