The news: Walmart and Amazon are moving fast-selling third-party merchandise closer to consumers to speed up fulfillment and make better use of their existing networks.

• Walmart this holiday season will expand its test of stocking select third-party merchandise in several stores’ back rooms, making those goods available for pickup and delivery, per Adweek.
• Amazon has been stocking some high-turnover sellers’ products in its same-day fulfillment sites while also letting sellers bid for placement in those facilities.

Why it matters: Positioning fast-selling third-party products closer to consumers can cut the time it takes to fulfill orders, potentially decreasing the delivery costs. That offers the promise of being a win-win-win.

• Customers get faster delivery and a better shopping experience that could make them more likely to purchase again, which is important because many consumers don’t differentiate between items sold by the retailer and those sold by third-party sellers.
• Sellers also benefit as faster fulfillment could pay off in higher sales. Amazon says products fulfilled through its same-day service have generated 12% higher sales on average than those delivered through its standard Fulfillment by Amazon service.
• Marketplace operators can drive more orders, bolster use of existing fulfillment networks, and potentially generate new revenues by charging sellers for access or preferred inventory placement.

Implications for retail: The faster Walmart and Amazon can fulfill consumers’ orders, the stronger their competitive advantages can become. We already expect Amazon and Walmart Inc. to account for more than half of US ecommerce sales this year. Faster delivery could further consolidate consumer spending on these platforms, particularly given the stickiness of their Prime and Walmart+ membership programs.

For Walmart, there’s a further opportunity to shift more ecommerce sales toward third-party products, which typically carry higher margins than first-party sales. Currently, 89.2% of Walmart’s ecommerce sales are first-party, compared with just 33.0% at Amazon. Faster fulfillment could make marketplace items more competitive with Walmart’s own inventory while potentially improving profitability, especially if the retailer eventually charges sellers for access to its fulfillment network.

As Amazon and Walmart sharpen their value proposition around speed and convenience, their competitors need to find their own differentiators, whether through high-touch customer service, curated assortments, product expertise, or distinctive in-store experiences.