Walmart ramps up grocery delivery to head off Amazon
- Walmart is taking grocery delivery out of testing mode, and will offer the service in 100 markets — reaching more than 40% of U.S. households — by the end of this year, according to a company press release.
- The retailer will use its own "personal shoppers" to pick orders and will crowd-source delivery through Uber and other providers. Each order carries a $9.95 service fee and a $30 minimum, and can be delivered same-day. Walmart says products ordered through the service, which include its full grocery assortment, will be the same price as in-store.
- Walmart currently offers store pickup at more than 1,200 stores and plans to add an additional 1,000 locations this year.
Most major grocers have quickly fortified their e-commerce positioning to deal with Amazon and its recently acquired Whole Foods stores. But Walmart is also proving a force to be reckoned with.
The low-price retailer has the scale and resources to bring significant value to shoppers. It’s done this with its popular click-and-collect program, which offers the full grocery line and doesn’t charge a fee. And it’s doing so with its home delivery service, which will soon be available to customers in major markets across the country.
Walmart’s $9.95 order fee and $30 minimum might seem steep to shoppers used to paying less for one- and two-hour Instacart and Amazon Prime Now deliveries. But Walmart won’t mark up its prices online, and it won’t charge a membership fee, which means greater savings over the long run. This is a tricky message to convey to shoppers, but it’s vitally important. How Walmart communicates this value to consumers will be crucial to the success of its home delivery service.
Although Walmart says delivery will be available same-day for customers, it doesn’t break out one- and two-hour timeframes like its close competitors. This could put it at a disadvantage, but there isn’t compelling evidence yet that speed offers a competitive advantage in grocery delivery. With this, Walmart is following a model closer to Peapod or FreshDirect, targeting stock-up trips that can build baskets and, ultimately, profitability.
Operations-wise, Walmart clearly chose to crowd source delivery in order to save money. The so-called "last mile" is the most expensive part of the equation, and still very much a work in progress for retailers across industries. Having its own staff do this would be costly given fuel charges, additional labor and other costs.
Store picking, meanwhile, can be streamlined through labor and technology efficiencies. Walmart already has staffers handling store pickup in many of its stores, and could use those same workers and systems to tackle delivery fulfillment. Walmart says each of its personal shoppers must complete three weeks of training to learn how to best select fresh produce, meat and other items.
Walmart will hope its expanded delivery service inspires bigger, more frequent orders and brings in new customers. The latter goal, it appears, has already shown promise. During a media call yesterday, Tom Ward, Walmart’s vice president of digital operations, said that in delivery test markets like Dallas and San Jose, California, the company has gained shoppers outside its normal store coverage area.
"We’re going to gain customers who might not have access to a brick-and-mortar store," he said.
Will it be able to replicate these results on a larger scale? With Target, Amazon and Instacart rapidly growing their coverage areas, online grocery fulfillment is becoming the Wild West.
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