Walmart invests $225 million to acquire grocery delivery service Cornershop in Mexico, Chile

by Kim Souza (ksouza@talkbusiness.net) 589 views 

The Mexico and Central American businesses are important to Walmart’s international growth, representing some of the fastest growing markets for the retail giant in recent years. Walmart announced Thursday (Sept. 13) a $225 million acquisition of Cornershop, a marketplace for online demand deliveries from grocery stores, pharmacies and specialty food retailers in Mexico and Chile.

Walmart said the deal is a step forward in trying to accelerate the company’s omnichannel capabilities while boosting growth in Latin America.

“We are focused on making life easier for customers and associates by building strong local businesses, powered by Walmart,” said Judith McKenna, president and CEO of Walmart International. “Cornershop’s digital expertise, technology and capabilities will strengthen our successful businesses in Mexico and Chile and provide learning for other markets in which we operate.

“This is an opportunity to leverage both of our brands, as well as Walmart’s strong supply chain and store network. Combining Cornershop’s innovative, crowdsourced delivery platform with Walmart’s unique assets will allow us to accelerate growth for both companies, delighting our customers by saving them both time and money. We are excited to welcome Cornershop to the Walmart family.”

Walmart said Cornershop is a leading online marketplace for crowdsourced, on-demand delivery in Mexico and Chile and is rapidly building scale, with the number of unique users doubling in the past 12 months. Cornershop’s three founders, CEO Oskar Hjertonsson, COO Daniel Undurraga and CTO Juan Pablo Cuevas, and their teams, will continue to lead the business.

McKenna said Cornershop will remain an open platform that will continue to deliver from a variety of retailers, extending the convenience and availability of food, health and wellness and packaged goods for customers in Mexico and Chile. The deal is subject to regulatory approval and is expected to close by the end of the year. Cornershop will operate under Walmart’s subsidiary Walmex.

The deal also includes a commercial agreement between the two entities under which Cornershop’s customers in Mexico City, Guadalajara and Monterrey will also be able to buy products through the Cornershop marketplace at the same price they could get in physical Walmex stores.

Guilherme Loureiro, president and CEO of Walmart Mexico, said during a conference call with investors Thursday that Walmex has been a pioneer in online grocery in Mexico, starting with Superama many years ago and then scaling to other formats. Today, Walmex offers grocery home delivery in 40% of Walmart stores and Sam’s Clubs.

He said Walmex has been building out its omnichannel business model for several years. The platforms include on-demand delivery, first party suppliers with a broad product offering and a marketplace which enables Walmex to expand its reach to more customers through a differentiated assortment.

Loureiro said Cornershop is three years old and has a unique low-cost IT development, world class app, replicable business model and on-demand crowd-sourced picking and delivery services. In Mexico, Cornershop delivers more than 2,000 orders daily in less than 90 minutes and offers more than 160,000 items from 237 stores.

Loureiro said combining the capabilities of Cornershop with Walmex will help the retailer expand the on-demand service to more stores and categories. It will also drive growth by leveraging Walmex physical presence, improve customer experience and simplify grocery delivery operations as well as give the retailers access to technology, talent and best practices in digital.

Walmex recently reported total August sales rising 7.8% from a year ago. In Mexico, the growth was 7.5% while sales grew 9.2% in Central America last month. Comp sales increased 5.9% in Mexico last month. For the first eight months of 2018, total sales rose 9% in Mexico and comp sales grew 7.6%. In Central America, comp sales rose 1.6% in August. Since January, comp sales have grown 6.8% on a constant currency basis in Central America.

The Cornershop investment follows a similar play in China with the ongoing partnerships with Dada-JD Daojia and the new strategic alliance made with Rakuten in Japan.

Retail analyst Clint Lazenby, co-founder of Legacy Retail Solutions, told Talk Business & Politics that Cornershop looks like a smart play for Walmart and Walmex.

“It’s great to see Walmart build and extend their capabilities in markets not generally considered leads in e-commerce,” Lazenby said. “Walmart can accomplish a couple of important elements with this strategy: lead the market driving scale and network density and potentially being able to learn and migrate the best ideas to other markets.”

He said the continued investments in developing networks which allow Walmart to leverage outside resources shows just how much the retailer has learned and changed its DNA from a one-time build-it mindset.  When asked about the timing of the deal in Latin America, Lazenby said it’s clear Walmart has an early lead over Amazon in Mexico and Chile.

“It’s hard to get a shopper to switch on grocery so you have to be there early and lead. Amazon is not doing that yet in these two markets,” Lazenby said.

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