Walmart to look beyond Uber for final mile delivery

Walmart has confirmed the pilot tests with Uber for final mile delivery in select markets of Dallas, Phoenix, Tampa and Orlando will end June 30. Walmart has since retained the services of Delivery, DoorDash and Postmates to help facilitate deliveries.

The retailer said it will continue to add new delivery providers and test delivery using its own employees in select markets. Walmart said customers will see no disruption of service in the markets previously served by Uber and the ending of the contract will not delay plans to add more than 100 cities this year.

The final mile delivery market is fragmented with new companies entering it each month. It’s likely Walmart will work with multiple suppliers and perhaps even expand its own delivery capabilities with an another acquisition like Parcel.

Walmart U.S. e-commerce CEO Marc Lore has said the retailer continues to look for more acquisitions to help grow online sales. Walmart President and CEO Doug McMillon said the blockbuster $16 billion deal to acquire a 77% stake in Flipkart won’t hinder the retailer’s efforts to continue growing its U.S. business.

With Walmart expanding online grocery to 1,000 new stores this year, having a delivery option will become more important, according to analysts with Kantar Retail. Analysts cite Instacart as an interesting option for Walmart grocery delivery as the retailer has already signed on with Sam’s Club to facilitate delivery. That said, Walmart has been hesitant to do so with its own business. Instacart requires retailers to upload inventory into its system, but Walmart already invested in its grocery pickup system that allows for easy re-order. If Walmart could tap into Instacart’s network of on-demand delivery workers without giving up the use of its own ordering and picking systems a partnership might be possible.

A recent survey of 61 retailers including Walmart, Target, Kroger, H-E-B, Publix and Wegmans, and specialty retailers Petsmart, Academy Sports and Lowe’s, indicated 48% are looking to balance costs and service. The survey, conducted by researchers at Auburn University in cooperation with Retail Industry Leaders Association and DC Velocity, also found 25% plan to enhance services this year. Roughly 82% of the planned investments is split between supply chain management upgrades and omnichannel capabilities, and the balance is earmarked for technology upgrades.

The majority of retailers said they are focused on increasing fulfillment choices in urban areas where Millennials are choosing to live and work. Nearly half (47%) of the retailers cite final mile costs as a major challenge. Making same-day deliveries from store fulfillment was cited by 86% of retailers as a challenge. The survey indicates 64% of customers are willing to pay a reasonable fee for same-day delivery but the retailers said the low fees don’t always cover the full cost.

Under the Uber contract, Walmart is charging $9.95 for the delivery fee on a $30 minimum order. The retailer has not said if those costs will change as more companies sign on to make grocery deliveries for Walmart.