Walmart to expand online grocery delivery to 40% of U.S. homes

by Kim Souza ( 1,017 views 

Walmart U.S. employees work to fill orders placed online for store pickup.

Walmart is ramping up online grocery delivery services this year with the help of Uber and other crowdsourcing partners. Tom Ward, Walmart vice president of digital operations, announced the final mile delivery option for online grocery will be available to 40% of the U.S. population by the end of the year.

He said more than 800 stores will be used as fulfillment centers for the online grocery delivery orders which are picked by more than 18,000 personal shoppers.

The cost will be $9.95 for a minimum grocery order of $30. Ward said the retailer is using lessons learned from six delivery pilot markets – San Jose, Calif., Phoenix, Denver, Tampa/Orlando and Dallas. He said customers will continue to get the same prices for their online orders as they would get if they shopped in stores. Ward said Walmart plans to provide the delivery option to more than 100 markets in 2018.

Ward said stores already equipped for online grocery pickup will be the ones used for fulfilling online grocery orders. He didn’t disclose which markets would be the first to expand to delivery options, but said the retailer is reviewing research from shoppers who use the pickup service to determine first rollout locations.

The service allows customers to select a delivery time, and orders placed by 1 p.m. will be delivered the same day. The $9.95 is a flat fee tacked on to the ticket total. The retailer is providing customers who try the service a one-time free delivery by using the code FRESHCAR when the first order is placed.

Walmart first announced the pilot delivery for online grocery in June 2016 at its shareholder meeting, using crowd-sourced transportation from Uber, Lyft and Deliv for an upcharge of between $7 and $10. Walmart in October 2017 confirmed the acquisition of Parcel, a startup final mile delivery service located in New York.

Ward said Walmart is moving to delivery because consumers want it. He shrugged off the notion it had anything to do with Amazon’s acquisition of Whole Foods and other competitors who use Instacart to handle final mile grocery delivery. Sam’s Club recently joined forces with Instacart to offer same-day delivery of food and general merchandise in Austin, Dallas-Fort Worth and St. Louis.

Walmart U.S. CEO Greg Foran said Walmart is using its size and scale to bring the best the retailer has to offer to U.S. customers.

“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,” Foran said.

Ward said Walmart continues to test and evaluate using its employees for delivery in select markets, but those deliveries are for general merchandise only. He said the company will ramp up to a phase two in the coming months. He said the personal shoppers who pick the grocery orders go through three weeks of special training to ensure they are using the one-best way approach the retailer has for selecting fresh products and the best cuts of meat for online grocery customers.

Walmart executives continue to tout the success of online grocery pickup, which is now available in 1,200 stores with 1,000 more being added this year.

“Our commitment goes further than saving customers money,” Ward said. “Ninety percent of Americans live within 10 miles of a Walmart store, and we serve more than 150 million customers a week, which gives us a unique opportunity to make every day a little easier for busy families. This is an expanded promise by helping even more customers save time and money without leaving their homes.”

Final mile is the biggest hurdle for grocery retailers offering home delivery. The retailer said in June 2016 that on-demand U.S. grocery delivery is challenging. While Walmart has had success in densely populated areas such as the United Kingdom and China, delivery to less populated U.S. areas is more difficult and expensive.

The demand for online grocery in the U.S. has also lagged that in other countries. But Ward said U.S. consumers are now getting more receptive to grocery delivery given their busy schedules.

Spieckerman Retail CEO Carol Spieckerman said Walmart’s willingness to partner on delivery shows the retailer’s nimbleness. She said there was a time Walmart management would have wanted to build its own system.

“Walmart is smart not to attempt to build out this system, but rather partner with companies that have already done so. This is a case where Walmart can use its scale and not have to do the bulk of the heavy lifting,” she said. “It’s a win-win.”

Unlike Whole Foods, Kroger and other retailers who use Instacart to handle the ordering process, Walmart has chosen to keep the ordering process to themselves. Ward said Walmart is not a stranger to home delivery, having offered it abroad for decades. He said Walmart chose to use its own systems for the ordering but saw benefits in partnering the delivery portion of the equation.

Spieckerman said retailers have to get accustomed to “buying, building and bridging” innovation if they want to survive evolution within the retail sector. She said the bridging with Uber and other crowdsourcing transportation companies makes sense, as did the acquisition of Parcel for the densely populated market of New York City, where Jet can also benefit from the learnings.

“Walmart is building out a kind of hub and spoke platform with and serving as the hubs and various delivery partnerships and mechanisms serving as spokes,” she added. “Retailers that have yet to fully integrate basic online and offline synergies would find this kind of cobble-together strategy hard to pull off. Through the integration of multiple acquisitions, Walmart has gained the confidence to keep going with it.”

A Field Agent report in mid-2017 found while a majority of shoppers never used delivery services, they were bullish about the prospect of grocery delivery in the future. Field Agent reported 32% of households had used online grocery delivery from AmazonFresh to their homes before the survey, but 58% of the new users taking part in the survey said they were “completely or very likely to use AmazonFresh delivery again.

Walmart’s grocery pickup was also evaluated by Field Agent, and 68% of shoppers surveyed said they hadn’t used online grocery pickup. But, 66% of shoppers said over the next five years they expect to use grocery pickup more. Walmart said shoppers who use online grocery pickup are typically repeat users.