Walmart Inc. has begun telling online shoppers that some products in its warehouses are “out of stock” after the retailer changed its e-commerce systems to avoid orders deemed too expensive to ship.
The change means that a bottle of detergent or can of cat food stored too far away from a customer’s shipping address will be unavailable for purchase. Previously, the retailer would ship those items, regardless of distance or shipping cost.
The new system, introduced earlier this month, has led to a decline in sales at some companies that sell their products on walmart.com, according to executives at Walmart suppliers. Some suppliers weren’t warned of the change in advance, said these people. Under the new system, suppliers will have to stock their products at more Walmart warehouses around the country to keep sales steady, according to an executive at a large food company.
“I think long term it’s absolutely the right choice” to make shipments more profitable, the executive said. “Short term, it’s a bit chaotic.”
The shift is part of a test, Walmart said, to see if it can deliver more products via ground shipping, a cheaper option than air shipping, in two days or less and reduce what it calls split shipments—online orders that arrive in multiple packages from different warehouses, according to Ravi Jariwala, a company spokesman.
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The test applies to products shoppers buy most, including household cleaners, nonperishable groceries, pet food and cosmetics. Mr. Jariwala said shoppers shouldn’t see a big increase in out-of-stock items because walmart.com will suggest similar products from nearby warehouses.
The new system is similar to technology used on Jet.com, the online retail startup Walmart bought two years ago, placing its founder Marc Lore at the head of its U.S. e-commerce operations.
Soon after Mr. Lore took the reins he introduced free two-day shipping on millions of items, if shoppers bought more than $35 worth of goods. That promise has proved costly, according to former executives.
Walmart is using its expanded fulfillment network and tests of this sort to “bring the cost down,” said Mr. Jariwala, declining to comment on the cost to-date.
Amazon.com Inc. offers free shipping on orders worth at least $25, though the deliveries can take more than two days. It charges customers $119 a year for its Prime membership program that offers unlimited two-day shipping of most items.
Walmart has tried several new tactics over the past year to make its growing online business more profitable, amid pressure from investors to show a return on the billions of dollars it has spent to expand its e-commerce business.
Over the past year Walmart asked suppliers to sell bundles of products and pricier items to make up for the cost of shipping. It raised online prices and started listing the lower in-store price for each item, but it quickly changed tack after consumers found the practice confusing. Some online prices are still higher than in stores. Walmart also revamped its website to appeal to higher-end brands and encourage shoppers to browse for products.
For now Walmart is leaning on the profits of its store business to grow online, said Chief Financial Officer Brett Biggs when the company reported second-quarter earnings earlier this month. The company expects e-commerce losses this year to be higher than last, he said.
Write to Sarah Nassauer at sarah.nassauer@wsj.com
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