Study, consultants say Walmart grocery pickup adoption by consumers is slow, retailer disagrees (Updated)

Editor’s note: Updated to add comment from Walmart U.S.
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Retail giant Walmart is betting big on grocery pickup as a way to fend off Amazon’s fresh home delivery offering. But while the efforts are being accelerated by Walmart, consumers are slow to adopt the new service, according to a study by Fayetteville-based Field Agent and consultants close to the situation.

Walmart disputes that notion. The retailer continues to expand the service recently announcing 8 new markets in April and 9 more in May making pickup available in nearly 40 different markets across the country. Walmart corporate spokesman Ravi Jariwala, said the company’s own customer responses indicate the service is being more widely used with each rollout.

Analysts have approved of Walmart’s investments in pickup, despite the slow user adoption rate. Given Wal-Mart’s massive footprint, pickup is the best way for the retailer to use its size to its advantage. It’s also part of Wal-Mart’s strategy to merge physical and digital shopping experiences given the order is placed online and then fulfilled in existing stores and picked up at the consumer’s convenience.

FIELD AGENT SURVEY
Field Agent surveyed 500 consumers in areas where pickup grocery is available but just 46% of respondents said they had heard of the service last fall. That could be because Walmart is working out kinks in the service before widely advertising it.

Walmart.com executive Michael Bender noted in a recent blog that 90% of Walmart grocery pickup users are repeat customers. Walmart has not said how many of its store customers are using the service. Jariwala said Walmart continues to work on the functionality of the service and sometime back added the Savings Catcher feature along with a favorite’s function which were not available at the time of the Field Agent study.

The Field Agent study suggests that adoption has been slow, noting that there remain challenges and opportunities with Walmart pickup.

Getting people to try the service the first time is perhaps the largest hurdle, given that consumers are creatures of habit and shopping for groceries online is still far from mainstream. Keith Anderson, vice president of strategy and insight for Profitero, told Talk Business & Politics that pickup grocery is more costly for Walmart to operate than the traditional store model because of the added labor costs for picking and processing the online orders. He said Walmart isn’t offering pickup necessarily to get new customers but to give its customer base another way to purchase groceries.

“It’s not a purely defensive play against competitors, it’s about retaining the shoppers they already have. I don’t see Walmart giving any cash incentives to promote faster adoption given the higher cost of the model,” Anderson said.

In past months Walmart has offered cash incentives of $10 for referral friends and family to the service, but prices of the products are the same online as they are in stores. Between last fall and this spring Walmart said it has activated Savings Catcher to work with online grocery which addresses one of the major concerns cited in the Field Agent survey. One of the biggest reasons Field Agents say they don’t use the service is because they couldn’t take advantage of sales promotions, coupons or Savings Catcher when shopping online. Jariwala said that is no longer the case.

Anderson said Walmart shoppers typically don’t mind spending time to save money so the time convenience of grocery pickup may not necessarily resonate with cost-consensus customers.

Half of the first time users of Walmart grocery pickup in the Field Agent study indicated that it took longer than expected to shop for their groceries online. Anderson said there are things Walmart can do to reduce the search time for grocery products online. He said other grocers with loyalty programs use past receipts and generate online orders based on a customer’s previous shopping habits. He said Walmart could do the same with e-receipts which are now available for users of Walmart Pay. Savings Catcher also stores the receipts of shoppers and that could also be used for generating shopping lists in the future, if Walmart eventually integrates all the disconnected systems involved.

He said Amazon’s Echo service, an intuitive way for users to add items to their shopping lists, could be also adopted by Walmart in the future.

“Who wouldn’t like to build their grocery list over the week as they think of items they need to replace. They would simply speak into the app and it would record the item on the list,” he said.

Anderson said Walmart doesn’t have to get be the first to figure out online grocery, but they do need to get there fast. He said the speaking feature – like Echo – is another way Walmart could lessen the time it takes to create a shopping list online.

Jariwala said Walmart.com has added added a favorites function that will automatically help build shopping lists for those items deemed to be favorites. He said this is a time saver when it comes to constructing shopping lists. He did not know exactly when that function became available.

POTENTIAL FOR LOST SALES
Another challenge for Walmart Pickup is that 44% of users in the Field Agent study said they couldn’t find everything on their list which means lost sales to Walmart because most did not substitute an item. This also means several participants did not see Walmart Pickup as a way to replace or substitute for a trip to the store.

Anderson said he doesn’t believe grocery pickup will comprise more than 10% of overall grocery sales in the next few years. He said 25% of people might use it once every two months but it won’t likely be the normal mode for most shoppers.

TechCrunch reported that Wal-Mart’s surveys indicate that a small majority (55%) would use Walmart grocery pickup not in lieu of a store trip but as a way to pickup groceries they perhaps forgot during their last store visit.

One user of the Bentonville pickup facility said in the study there were at at least three items on her list not available online so she would have to go to the store for those items. She also noted that the milk purchased was too close to expiration date for her liking. She also said one of the six eggs was cracked, but the attendant checked before putting them into the car and found the cracked egg and went back to get another carton.

“I feel like they should have checked that before they brought the order to the car,” she said.

Overall this user said her first experience at Walmart grocery pickup was satisfactory.

Anderson said pickup centers may not have all the items that can found in the traditional store because of the perishable nature of some items. He said as along as the number of users remain low relative to in-store shoppers it makes sense for Walmart to equip its stores for pickup. What has happened in other markets is when online orders grow to the point where they disrupt store operations they are typically moved offsite to “dark stores,” which has been the model used by Walmart ASDA.

Following are other concerns voiced by users in the Field Agent survey.
• 59%: Inability to take advantage of sales promotions
• 46% Lack of seeing, touching, smelling the groceries
• 26% Difficulty navigating the website
• 21% Limited selection/ variety of products
• 15% Time involved in shopping and retrieving