story by Kim Souza
Convenience is the name of the game in retail these days and Wal-Mart Stores Inc. is taking nothing for granted as they test and build out a tethering system that will include pick-up depots for items ordered online.
Walmart U.S. CEO Bill Simon said Tuesday (March 4) during a speech at the Raymond James & Associates investors conference in Orlando, that the retailer is focused on delivering service where and how consumers want it.
He said the drive-through pick-up for online orders being tested in 11 stores in the Denver area are yielding a 90% satisfaction rating with consumers. This test in the Denver market was first announced in October. Shoppers pull into the parking lot and a loader brings the items to the car. Wal-Mart also allows order pick-up through the drive-in pharmacy line.
This notion of drive-in has prompted Wal-Mart to explore and test the drive-in depots that are not attached to a supercenter. Simon described the drive-in modular as a “Sonic-like.” Simon did not give specifics about the timeframe for the depot concept, but said it is part of the retailer’s tethering efforts to fully connect its digital orders with its massive physical infrastructure.
He described the retailer’s tests that will allow someone to order online, then pick-up that order later in the day at various places of their own choosing. For instance, he said the online order could be picked-up at the retailer’s gas station later in the day when the shopper stopped for fuel. Simon reminded the analysts that the pick-up service does not require a subscription and is for any of the products offered by the retailer from big screen televisions to snow shovels.
He said the retailer continues to test numerous initiatives toward more convenience such as lockers which are used in its ASDA business in the U.K., and more recently offered in Washington D.C.
This new stand alone pick-up depot modular could include lockers which are filled through various supply chain options — the nearest supercenter, smaller delivery trucks running from distribution center to the depot or direct shipment from online fulfillment centers.
Wal-Mart has said the pick-up depots – whether attached to a supercenter, smaller format or as a stand alone unit – are not designed to replace the traditional stock-up trips, which are a $585 billion market and still 60% of the grocery spend. Wal-Mart has a 25% share.
The drive-in service is for more about convenience, and those fill-in trips mid-week, an area that Wal-Mart has lost sales to in recent years from the rise of smaller format dollar stores and convenience stores. Simon said this quick-trip market is worth $415 billion annually and equals some 40% of the U.S. grocery spend. Wal-Mart’s share is just 10%, something the retailer thinks it can improve.
This is a concept quite similar to the “dark stores” that retailers like Tesco and Waitrose have begun to open in Europe – depots that hold no inventory and serve as pick-up locations for goods purchased online, said Carol Spieckerman, CEO of NewMarketBuilders in Bentonville.
"This is an exciting development on a number of fronts. Standalone locations will get products to shoppers without forcing them to navigate football-field-sized parking lots and supercenters. The convenience factor alone is huge and in some cases, may mitigate price comparisons. Wal-Mart wins a number of other fronts by expanding its omnichannel scale, optimizing total enterprise inventory and bringing convenience-conscious customers on board who otherwise might not shop at Wal-Mart – all without the costs and location limitations associated with building stores. These locations will be inherently cost-effective and less labor intensive than the smallest of stores and advances in robotics have the potential to make them even more so," Spieckerman said.
She applauds the retailer's efforts saying "Wal-Mart gets it" that attempting to force customers into a couple of convenience solutions isn’t the way to go and its growing portfolio of right product, right time, right place options represents the ultimate in customer-centricity.
"The drive-through options play heavily on convenience and will be particularly effective in driving incremental business with shoppers who already trust Wal-Mart yet may shop elsewhere for fill-in trips. This is a powerful attack on drug retailers and dollar stores that continue to expand into consumables and fresh produce in particular. Until Wal-Mart’s small format stores proliferate, drive-through options are a great way to keep convenience-focused, price-sensitive customers from seeking other options," Spieckerman added.
Simon told analysts the retailer will continue testing various initiatives designed to bring more convenience to the consumer while adding retail sales with minimal costs. He said once a test proves to be viable the retailer has no problem with a quick rollout. In terms of home grocery delivery, Wal-Mart is testing it in the San Jose/San Francisco market since 2011, but is not yet convinced there is enough demand for a larger rollout.
Wal-Mart has said it’s in the process of increasing the number of small trucks for grocery home delivery program from seven to 10. Wal-Mart continues to test same-day delivery of general merchandise in northern Virginia, near Washington D.C., Philadelphia, Minneapolis and in the San Francisco area.
Simon said three of the retail ecosystems announced in October will come online this year, the first of those in May. The facilities in these fully tethered ecosystems could soon include stand alone pick-up depots.