In an effort to tamp down last-mile delivery costs as it ramps up its e-commerce sales, Wal-Mart Stores is employing store staff to make deliveries to customers’ homes, the company’s U.S. e-commerce CEO, Jet Founder Marc Lore, said in a blog post Thursday.
The task is voluntary and a way for store associates to make more money, he said. “If they choose to opt in, we’ve built technology that allows them to set preferences” like how many, how big and how heavy the packages are, and which days they can make the trips. Packages will be allocated based on minimizing the collective distance workers must veer their commute to make a delivery, according to the post.
The effort is still an experiment, with three test locations – two in New Jersey and one in northwest Arkansas – though that the response from associates and customers alike “has been great,” said Lore. The set-up is allowing many orders to be delivered next day, and associates appreciate the opportunity to earn more money, he said.
Wal-Mart has spiked its e-commerce sales since its acquisition of Jet.com last year and the subsequent purchase of several smaller pure-play online retailers. In its most recent quarter, Wal-Mart’s e-commerce sales ballooned 63% with an attendant 69% rise in digital gross merchandise volume, as same-store sales increased 1.4% and traffic to stores rose 1.5%. But last-mile delivery continues to vex retailers, including Amazon, which has similarly experimented with having warehouse workers and even ordinary, errand-running citizens deliver packages to homes.
This is where Wal-Mart’s vast network of stores comes in handy. “Walmart has strength in numbers with 4,700 stores across the U.S. and more than a million associates,” Lore said Thursday. “Our stores put us within 10 miles of 90% of the U.S. population. Now imagine all the routes our associates drive to and from work and the houses they pass along the way. It’s easy to see why this test could be a game-changer.”
That brick-and-mortar advantage overshadows even Amazon’s vast network of warehouses and fulfillment and sorting centers, and would be useful to many traditional retailers and not just Wal-Mart, according to Moody’s Lead Retail Analyst Charlie O’Shea.
“Walmart’s announcement that it was testing a program that will utilize store employees to deliver online orders is an example of the flexibility brick-and-mortar retailers have at their disposal to leverage their existing store locations to support online efforts,” O’Shea said in an email to Retail Dive. “We have seen the effectiveness of this model in the auto parts segment for years, with delivery times measured in hours, not days, and believe savvy brick-and-mortar retailers will follow this model in some fashion going forward. This effort provides Wal-Mart with even more control over the last mile, which we believe is critical in retail, and remains an advantage for brick-and-mortar retailers as speed to the customer gains increasing importance.”
It’s an example of a brick-and-mortar stalwart creating a new kind of fulfillment ecosystem, Tushar Patel, CMO of omnichannel solutions platform Kibo, told Retail Dive, who agreed with O’Shea that it represents an opportunity for Wal-Mart’s rivals.
“Wal-Mart’s store associate delivery initiative represents a shift in the landscape of last-mile delivery,” he said in an email to Retail Dive. “To date, we have seen a majority of retailers test out and implement [buy online pick-up in store] initiatives to not only maximize their shipping strategy and drive in-store traffic, but to also deliver a competitive offering against Amazon. Through this test-pilot, Wal-Mart is taking the last-mile delivery one step further and creating a broader ecosystem that not only utilizes their physical store presence as a central hub for retail operations but maximizes the power of their physical presence to aid in their order fulfillment strategy.”
Still, while Lore’s tech-based approach and Wal-Mart’s many stores may be up to the challenge, it’s an extremely complex endeavor that doesn’t quite fit with Wal-Mart’s longtime efficiencies in consumer goods distribution, which entails the customer taking care of that last mile. As the company's digital sales continue to surge, it may find that the volunteer approach is inefficient. Either way, it means more costs.
“It is very complex, as you can guess, one vehicle and 80 addresses for one day is a typical problem,” Antonio Perini, founder of Italian delivery service Milkman, told Retail Dive last year. “But there’s many different solutions in terms of how many sequences exist. As a customer, you may be willing to trade some of your time constraints for a discount. Some shoppers value their time while others care a lot about money. Or sometimes you want the luxury of having your delivery done in a given hour. It will come at that price, but I have an advantage: I have capacity, so it’s extremely cost-effective for me. The two things balance themselves.”