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Walmart Expands Online Grocery Delivery to 100 Cities Walmart Expands Online Grocery Delivery to 100 Cities
(about 2 hours later)
Walmart is expanding its online grocery delivery service to more than 100 metro areas in the United States as it tries to keep pace in an increasingly expensive turf war with Amazon, Target and other retailers over the lucrative e-commerce market. The path to fast and affordable online grocery service is littered with obstacles: refrigeration challenges, storage woes and high transportation costs, among others. But the country’s largest retailers are convinced that it leads to a lucrative and largely untapped market.
On Wednesday, Walmart said its delivery service, currently offered in six cities and surrounding areas, would be available to more than 40 percent of American households by the end of the year. And they are all rushing to establish dominance first.
Some orders would be delivered on the day they are placed, the company said. Walmart plans to use 800 of its own stores to fulfill customer requests, and partner with Uber and other driving services for delivery. On Wednesday, Walmart escalated the competition by announcing plans to expand its online grocery delivery service to 100 metropolitan areas by the end of the year, with orders fulfilled at more than 800 stores nationwide and shuttled to shoppers by drivers contracted through Uber, Deliv and other ride and delivery contractors. Customers must order at least $30 worth of goods and pay a delivery fee of $9.95; they can receive their purchases in as little as four hours if they order by 1 p.m.
“We’re saving customers time by leveraging new technology, and connecting all the parts of our business into a single seamless shopping experience: great stores, easy pickup, fast delivery, and apps and websites that are simple to use,” Greg Foran, the chief executive of Walmart U.S., said in a statement. The move puts the world’s largest retailer on a direct collision course with the world’s most powerful e-commerce player, Amazon, which purchased the Whole Foods grocery chain for $13.4 billion last summer and recently announced plans to use those stores to service on-demand orders.
Walmart charges a $9.95 fee for its grocery delivery service, and requires a minimum order of $30. And other retailers like Costco, Target and Kroger are piling into the increasingly expensive battle for customers who want eggs and milk without leaving their couch. Only 23 percent of Americans currently buy groceries online, but 70 percent will do so in five to seven years, according to joint research from Nielsen and the Food Marketing Institute.
The company’s newest challenge to Amazon targets two industries that are increasingly appealing to retailers: e-commerce and grocery. Ever since Amazon rattled rivals in June by buying the upscale grocery chain Whole Foods for $13.4 billion, other retailers have been racing to provide home delivery of groceries bought online. “There is a lot of experimenting going on as everyone tries to figure out that last-mile delivery — it’s a tough economic equation to make work,” said Mike Knemeyer, a professor of logistics at Ohio State University. “But if you can, you’ll have a big head start on the others, and you’ll end up making money not just in groceries but on all of the things that you sell.”
The company’s newest challenge to Amazon targets two industries that are increasingly appealing to retailers: e-commerce and grocery.
In October, Costco introduced a two-day delivery option for dry groceries and a same-day alternative for fresh goods through Instacart, a delivery service. Target said in December that it would purchase the online same-day delivery service Shipt for $550 million in cash.In October, Costco introduced a two-day delivery option for dry groceries and a same-day alternative for fresh goods through Instacart, a delivery service. Target said in December that it would purchase the online same-day delivery service Shipt for $550 million in cash.
Earlier this month, Amazon said it would offer same-day delivery of groceries from Whole Foods in six cities. On Monday, Kroger followed suit with an announcement that it would expand the number of cities eligible for home delivery of groceries through Instacart.Earlier this month, Amazon said it would offer same-day delivery of groceries from Whole Foods in six cities. On Monday, Kroger followed suit with an announcement that it would expand the number of cities eligible for home delivery of groceries through Instacart.
But a grocery delivery service could be difficult to implement and market to shoppers, experts said. Walmart’s Sam’s Club division, which said last month that it would offer members free shipping of online orders for an annual $100 fee, also uses Instacart. But Walmart said it would not tap the service for its namesake stores’ grocery delivery program.
“There is a lot of experimenting going on as everyone tries to figure out that last-mile delivery — it’s a tough economic equation to make work,” said Mike Knemeyer, a professor of logistics at Ohio State University. “But if you can, you’ll have a big head start on the others, and you’ll end up making money not just in groceries but on all of the things that you sell.” The company has made several substantial investments into its growing suite of online offerings, including a partnership with Google to sell Walmart products on Google Express, and a $3.3 billion acquisition of Jet.com, a bulk online retailer.
Walmart’s announcement follows several substantial investments by the company into its growing suite of online offerings, including a partnership with Google to sell Walmart products on Google Express, and a $3.3 billion acquisition of Jet.com, a bulk online retailer. But success has sometimes been fickle — Walmart’s online sales increased 23 percent in its most recent quarter, less than half the rate of growth in each of the prior three quarters. But success has sometimes been fickle — Walmart’s online sales increased 23 percent in its most recent quarter, less than half the rate of growth in each of the prior three quarters.
Walmart also reiterated on Wednesday that it will expand its curbside grocery pickup service, which allows customers to order food online and collect it at stores, to another 1,000 locations this year from the 1,200 locations where it is already offered. And last month, the company said it would offer members of its Sam’s Club chain free shipping of online orders for an annual fee of $100. On Wednesday, Walmart also reiterated that it will expand its curbside grocery pickup service, which allows customers to order food online and collect it at stores, to another 1,000 locations this year from the 1,200 locations where it is already offered.
“We’re saving customers time by leveraging new technology, and connecting all the parts of our business into a single seamless shopping experience: great stores, easy pickup, fast delivery, and apps and websites that are simple to use,” Greg Foran, the chief executive of Walmart U.S., said in a statement.
Door-to-door delivery, however, requires a level of logistical planning that has stumped many retailers.Door-to-door delivery, however, requires a level of logistical planning that has stumped many retailers.
Walmart’s service requires customers to visit the company’s website or grocery app to place orders. The chain will then send one of its 18,000 personal shoppers to collect the selected items.Walmart’s service requires customers to visit the company’s website or grocery app to place orders. The chain will then send one of its 18,000 personal shoppers to collect the selected items.
Each of those employees — along with the thousands more that Walmart said it would add this year — undergoes a three-week training program that teaches them to pick out the best produce and meats.Each of those employees — along with the thousands more that Walmart said it would add this year — undergoes a three-week training program that teaches them to pick out the best produce and meats.
After the order is prepared in the store, a delivery service like Uber would whisk it away to the customer.After the order is prepared in the store, a delivery service like Uber would whisk it away to the customer.
Offering expanded online grocery delivery is an “informed gamble” for Walmart, Mr. Knemeyer said, one that will likely serve up side benefits such as data collection and inroads into the affluent urban consumer base.Offering expanded online grocery delivery is an “informed gamble” for Walmart, Mr. Knemeyer said, one that will likely serve up side benefits such as data collection and inroads into the affluent urban consumer base.
But Walmart’s upfront $9.95 fee on each order is a much more visible cost to consumers compared to Amazon’s annual $99 fee for its Prime membership, which some shoppers set to auto-pay and then forget.
“They probably just look at the relatively high delivery fee and get scared off,” said Matthias Winkenbach, director of M.I.T.’s Megacity Logistics Lab. “Walmart would have to do a very good job communicating the overall economics of shopping their everyday low prices versus Amazon.”