How Walmart, Target and Best Buy Are Starting to Compete With Amazon

NEW YORK (TheStreet) -- Brick-and-mortar stores, which have been hammered by online retailers like Amazon (AMZN) , are starting to fight back.

Big-box retailers like Walmart (WMT) , Target (TGT) and Best Buy (BBY) are ramping up their online operations and seeing sales boom, making inroads against e-commerce giant Amazon.

The retailers, which also include Macy's (M)  and Home Depot (HD) , have taken a page from Amazon's own playbook by turning many of their stores into distribution centers that can fill online orders quickly and efficiently.

U.S. retail e-commerce sales reached $75 billion in the second quarter, up 4.9% from the previous three-months, according to the Census Bureau. It marked the second consecutive quarter in which the sequential growth rate has accelerated -- following a 3% increase in the 2013 holiday quarter, U.S. retail e-commerce sales gained 3.3% in the first quarter.

Leading the pack is Macy's, which began using stores to fill online orders in 2010.  The company completed the rollout this spring, giving Macy's about 650 namesake stores with this shipping capability.  Macy's is also rumored to be testing same-day delivery in four markets, using logistics companies UPS (UPS) and FedEx (FDX) to get merchandise to consumers.

After launching "buy online, pick up in store" a few years back, Home Depot is preparing to unveil its buy online and have merchandise shipped from the store program.


"We're actually going to roll it out later this year, and it will be around bigger-ticket items," a company spokesperson shared in an interview with TheStreet of the initiative.

To support the rollout, Home Depot is in the process of "building out three direct fulfillment centers currently," said the contact, with one "opening soon" in Georgia, followed by two others in the Midwest and West Coast. When all three, 1 million square-foot centers are up and running by mid-2015, Home Depot will be able to offer two-day shipping to 90% of consumers.

The new capability for Home Depot, who is battling with trying to find the source for an alleged data breach, mirrors a ship-from-store program being unveiled by Target ahead of the coming holiday season at 140 stores. Target will ultimately have the ability to reach 91% of U.S. households by ground transit within one to two days.

A glanced-over item in Best Buy's second-quarter results was that come holiday season 2014, it will have ship-from-store capabilities for its merchandise in all 1,400 of its stores, reducing the likelihood of missed sales and helping to support stronger profit margins on clearance goods. In last year's holiday season, Best Buy only had this option available in a few hundred stores. The new capability has already provided a jolt to the business. 

Best Buy's domestic online same-store sales increased 22% in the second quarter, and by 29.2% in the first quarter. Adding fuel to Best Buy's online sales fire, the company now price-matches its competitors, including Amazon.

Next up for physical retailers in their battle against Amazon -- using their digital storefronts to make consumers aware of the new buy online, pick merchandise up in store services, as Macy's has started doing within the past two weeks.  Amazon may need approval for its flying drone delivery network quicker than imagined to compete with old school retailers that are getting closer, and closer to consumers in terms of shipping proximity.

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At the time of publication, the author held no positions in any of the stocks mentioned.

This article is commentary by an independent contributor, separate from TheStreet's regular news coverage.

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