SPEED TRAP

Walmart thinks it’s moving fast, but it may not be fast enough

There’s on old cliché about how hard it is for battleships to change direction. To its credit, Walmart—one of the biggest corporate ships in the sea—is changing faster than anyone could expect, responding to threats from Amazon, European grocers, and specialty retailers.

It might not be fast enough.

Amazon announced June 16 it will buy Whole Foods for $13.7 billion, a major step in CEO Jeff Bezos’ ambitions to dominate all retail sectors. It’s a clear shot across Walmart’s bow; Walmart’s shares tumbled 6% on the news.

At a series of events for media and investors two weeks ago at its Bentonville, Arkansas, headquarters, Walmart flexed its physical presence as an answer to inroads by Amazon. With almost 5,000 US stores, 6,100 trucks, and 1.5 million employees, Walmart plans to leverage this massive infrastructure to get food and merchandise to customers when and where they want it.

Walmart executives argue —reasonably—that customers don’t want to wait around their houses for grocery deliveries, or have ice cream melting while it sits on the porch. To meet shoppers’ needs, Walmart is rolling out pick-up bays at its stores, where harried suburban families can pull up in their SUVs and collect their orders on the way home from work or school.

Amazon’s acquisition of Whole Foods makes Walmart’s advantage in stores far less insurmountable. Not only does it give Amazon 430 stores and a network of distribution centers (read: online fulfillment centers), but a stake in online delivery startup Instacart.

Meanwhile, Walmart’s forays online now seem less impressive. Overshadowed by the Amazon announcement was Walmart’s own acquisition today of men’s online clothing company Bonobos for $310 million, the latest in a series of small-scale e-commerce purchases the retail giant has made to expand its offerings beyond mainstays like tube socks and laundry detergent.

The linchpin of Walmart’s online strategy was the acquisition of Jet.com—an innovative but small Amazon competitor—for $3.3 billion last year. Jet.com founder CEO Marc Lore is now running Walmart’s e-commerce strategy and his early returns are impressive, with online sales soaring 63% in the first quarter, spurred in part by offering free shipping for purchases over $35. Lore isn’t shy about trying new things, and on June 1 Walmart announced a pilot project to turn store associates into delivery drivers, potentially eliminating the need to pay UPS or FedEx. It’s another way Walmart can capitalize on its army of employees.

But for all the energy devoted to online sales, they remain a small piece of the Walmart empire and threats from German chains Aldi and Lidl—which are attempting undercut Walmart on price—loom. Walmart is moving urgently to meet these challenges, Judith McKenna, chief operating officer for the US, said in an interview.

“Retail is changing and it’s changing fast, and it’s not just digital,” she said. “There’s this great phrase, which is ‘speed is the only competitive advantage.’ This sense of urgency is what’s driving us.”

Unfortunately for Walmart, Amazon just picked up the pace.

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