Wal-Mart uses discount to woo more consumers to pickup format

story by Kim Souza

Try it, test it, fix it and move on. That’s the mantra for retail giant Wal-Mart Stores and there is no shortage of tests conducted in the pursuit of demanding consumers. The process also includes a new management team aimed at improving service and growing sales.

One of the more unique tests involves online grocery orders that are picked up in stores in San Jose, Calif., Phoenix, Huntsville, Ala., and Denver; or at the stand alone Pickup Grocery format in Bentonville which opened to the public six months ago.

In recent weeks the “Everyday Low Cost” retailer began offering deeper discounts to consumers willing to try the online grocery-pickup experience. Using targeted emails to Walmart.com customers in the test areas like Northwest Arkansas, Wal-Mart agreed to give a $10 discount on a user’s first $50 order. This offer went out to proposed customers on Monday (March 24) and is good through March 26. The offer supplies an eVoucher code that can be used at checkout. This offer comes on the heels of a $5 discount voucher offered in recent weeks to the same potential shoppers.

The City Wire asked Wal-Mart about the savings offer and was told the retailer is trying new ideas with this format, but provided no other info about the limited time savings promotion. 

“We are testing many things and we’re continuing to learn from our customers,” said  Betsy Harden, Wal-Mart corporate spokeswoman.

Hardin said the retailer has no data to share on the standalone Pickup Grocery format. She did say the Pickup Grocery option in Denver that has been tested for more than a year is seeing roughly 80% of orders from repeat customers.

Retail expert Carol Spieckerman, CEO of newmarketbuilders.com, said the discount offers are no doubt an effort by Wal-Mart to drive traffic to its Pickup Grocery so it can collect more insight on how shoppers use the concept. She said they are also interested to see how promotions alter traffic.

The stand alone format in Bentonville opened in September, and since that time the retailer has opted to expand the Pickup Grocery option to stores for fulfillment adding Sam’s Club in Bentonville, Walmart Stores in Huntsville, Ala., and the Phoenix market as of February.

The retailer is also featuring its Pickup Grocery in a multiple platform media campaign from Internet banner ads on Yahoo! to local billboards in markets where the tests are underway.

Wal-Mart could have put its Pickup Grocery format anywhere but likely chose to build it close to its Bentonville headquarters for easier access and hands-ons experiments and ongoing tweaks that come from customer feedback. 

Spieckerman applauds Wal-Mart for the investing in the Pickup Grocery test lab adding that the retailer has “little concern about cannibalizing sales by clustering Neighborhood Market locations nearby. In fact, purposefully altering the Northwest Arkansas retail landscape only serves to provide Wal-Mart with greater insight into how alternative formats will fare in more saturated urban markets.”

Stewart Samuel, an analyst with IGD, told The City Wire that his firm talks to more than 1,000 shoppers each month about attitudes, motivators and barriers to food and grocery shopping online. The research is done in Great Britain, a market that is more advanced with online grocery buying than the U.S.

Looking at this data is perhaps one way to assess how U.S. demand could develop if the options were available, Samuel said.

Judith McKenna, chief operating officer for Walmart U.S., who spent time with Walmart’s ASDA in the United Kingdom, said pickup depots are gaining in popularly across Europe where home grocery delivery is not a new concept.

Samuel said IGD’s research shows 18% of online grocery shoppers use home delivery and pickup options. While the majority of those surveyed still prefer home delivery, the pickup option is attracting more users with each quarter of the survey. One in five online grocery shoppers use that service once a week or more. Another 20% said they shop online every two weeks, while 23% said they use it as a stock-up trip one time a month.

The major motivation behind using online shopping among those surveyed by IGD is the convenience factor, with 82% saying it’s easy and convenient, and 59% said they shop online because its quicker.

“In my experience using the Pickup concept, I’ve encountered many shoppers who rely on it to the exclusion of other formats so Wal-Mart would seem to already have solid examples of how its Pickup Grocery is driving loyalty,” Spieckerman said. “It remains to be seen how or if Wal-Mart will deploy the format in other regions but in the meantime, the insights gained are surely being parlayed into its other businesses.”