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Walmart CEO Says Stores Are the Distribution Centers It Needs Against Amazon

Walmart Inc Chief Executive Doug McMillon said on Monday that the discount chain's thousands of stores give it the distribution firepower it needs to compete again its e-commerce rivals, notably Amazon.com.

While Walmart has 20 fulfillment centers assignment specifically to support its e-commerce business, compared to 100 for Amazon, the retailer's 4,500 stores give it an edge in speeding up delivery, food and otherwise, McMillon said at Fortune's Brainstorm Tech conference in Aspen, Colo.

That is particularly crucial for Walmart's $170 billion food business, which makes it the largest U.S. grocer by far. Not only are stores closer to customers, but using store inventory offers Walmart another chance to sell items and have less go to waste.

"One of the realities of fresh and perishable food is if you don't sell it, you throw it away or give it away," McMillon said. "When you have a store environment and you have fresh or perishable food so close to people, those stores then become dual store and pick centers." Pick centers refers to facilities where merchandise is used to fill online orders for delivery or pickup. The CEO said 60% of Walmart stores "function in that way and that's an advantage for us." Amazon operates few stores other than its Whole Foods chain.

The world's largest retailer now offers grocery pickup at 3,100 U.S. stores and by year-end, will offer same-day grocery delivery at 1,600 stores. And McMillon said the lessons Walmart is learning as it hones food delivery and pickup is helping it learn to use stores to fill non-food orders more efficiently too.

Walmart, which McMillon conceded had fallen behind Amazon and has had to play catchup, could use any advantage it can find. According to recent eMarketer data, Amazon accounts for 37.7% of all U.S. retail e-commerce sales, compared to 4.7% for Walmart.

To be sure, Walmart's digital sales have grown robustly, rising 37% in the first quarter, and expected by Wall Street to hit $21 billion or so this year.

McMillon downplayed a recent report in Recode that said that there were tensions among Walmart executives over the pace of its e-commerce growth and its challenges in limiting losses. (Morgan Stanley recent estimated Walmart's e-commerce losses this year would come to $1.7 billion this year.) He joked that he and Marc Lore, who sold jet.com to Walmart in 2016 for $3 billion and now heads Walmart's U.S. e-commerce, still liked each other.

At the conference, which coincided with Amazon's Prime Day sale, McMillon admitted he admired the rival company's focus on "speed innovation customer centricity convenience."

"We're not proud, we're not egotistical. If someone is doing something better than we are, let's copy and paste when we should and when we can," he told Brainstorm Tech.

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