Walmart explains why it isn't racing to close its biggest gap with Amazon on next-day delivery

AP

• Walmart's next-day delivery service covers 220,000 items. By comparison, Amazon's next-day shipping for Prime members covers 10 million products.
• Walmart e-commerce CEO Marc Lore said Friday that Walmart is focusing on a slimmer assortment to keep costs manageable.
• "It's a trade-off," he said. "After you get past the top, let's say, hundreds of thousands - or top million SKUs - with overnight or next-day delivery, it gets exponentially more expensive."
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Walmart and Amazon are going head-to-head in a battle to win over customers with free next-day shipping.

The companies announced their respective next-day shipping programs within weeks of one another, and on Monday, Amazon boasted that its next-day shipping service has already grown to cover more than 10 million items.

That's about 50 times the number of products that Walmart is offering for next-day delivery. Walmart is offering about 220,000 items for next-day delivery to start, and plans to eventually add another couple hundred thousand items.

Read more: Amazon just fired the latest shot against Walmart in the free-shipping wars

Walmart executives were asked directly about this gap in assortment on Friday during a meeting with Wall Street analysts at the company's annual shareholders meeting in Bentonville, Arkansas.

In response, Walmart e-commerce CEO Marc Lore suggested that it's too expensive to offer everything under the sun for next-day delivery.

"It's a trade-off," he said. "After you get past the top, let's say, hundreds of thousands - or top million SKUs - with overnight or next-day delivery, it gets exponentially more expensive."

He said it makes more sense to offer a selective assortment for next-day delivery, so Walmart has more money to invest in things like same-day grocery delivery.

"There's limited pool of dollars and you have to decide where to invest in the value prop," he said. "Do you invest beyond the top 80% of sales? Do you go for speed there? Or do you take those dollars and put it into same-day delivery of grocery?... So that's sort of the trade we've made and that's how we've differentiated the value."

Read more: Walmart employees will soon deliver groceries directly to your fridge

Amazon said in April that it would shorten its two-day-shipping promise for Prime customers to one day. Amazon's Prime program costs $119 annually.

Three weeks later, Walmart launched free next-day shipping on minimum purchases of $35. The service doesn't require any membership fees.

Amazon hasn't provided details on what percentage of its customers now have access to free one-day shipping. The company said only that it was available "coast to coast" in more than 10,000 cities and towns.

Walmart has said that its next-day shipping offer will be available to 75% of US consumers by the end of the year, and that the program will keep expanding next year.