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The Walmart delivery landscape just got a big makeover.
Let’s take a look at how and why…
Walmart is struggling. 2015 marked its first yearly decline in revenue since it became a public company in 1970. It has also seen continuous 7 to 8 quarters of flat growth. Furthermore, in the same year, Walmart announced the closure of 269 underperforming stores. It was perhaps the biggest acknowledgment of the steep predicaments that are on hand.
These Achilles heels were even worsened by the fierce competition from Amazon. According to one estimate, Amazon accounted for almost a quarter of all retail sales growth last year. Other retail stalwarts, including Macy’s, Sears and J. C. Penney, are also shuttering stores after a weak holiday sales season. The following figure can be considered as a prime indicator of the unquestioned dominance of Amazon. The interesting thing to note here is that the study has combined the web sales of the next 21 retailers, including Wal-Mart, Target, Best Buy Co., Macy’s Inc. Home Depot Inc., Nordstrom Inc., and Costco.
Given figures like these, Walmart decided to strengthen its e-commerce arm, but it’s not faring well yet. Walmart’s e-commerce growth has slowed for each of the past five quarters. Indeed, all these blows were more than enough for Walmart to put it into some serious strategic pondering mode. One of the outcomes of this brainstorming was CEO Doug McMillon’s decision to expand its grocery fulfillment program.
The retailer has made a deal with both Uber and Lyft to bolster the efficiency and scope of the Walmart delivery system. The announcement of this new development came in Walmart’s annual shareholders meeting in Arkansas. Similarly, Sam’s Club, its sister company, is also implementing parcel delivery service to deliver general merchandise and groceries.
At its surface, this Walmart delivery expansion is a wise, cautious, as well as a strategic move as grocery is still a largely protected segment from the gigantic influence of Amazon. Further, Walmart cannot afford to lose its control over the grocery segment considering the fact that it got $167 billion last year from groceries or 56% of its overall annual sales. This change becomes even more notable, since until now Walmart has singularly focused on curbside pickups where customers can arrive outside the store at their convenient time and pick up their deliveries with the help of the trained staff of the store. But feeling the severe pressure from the mere presence of Amazon, it is now ramping up its doorstep grocery delivery too. This tie ups with Uber and Lyft is a small step in that effort. In a few weeks, it will begin those delivery tests in Denver and Phoenix. In one market, Uber will be trialed, while the other will use Lyft.
But How Will This Actually Function?
Through this program, customers will be able to shop via Walmart’s online grocery service at grocery.walmart.com where they can select from 40,000 items (30,000 are food items, while the rest are items like cosmetics, diapers, and pet food.) Customers can request delivery at checkout for a small fee.
After placing the online order, particularly trained Walmart Personal Shoppers will fill those orders. Then after choosing the option of home delivery, customers can also select a time frame. The additional cost of $7 to $10 which has to be paid by customers will help Walmart in equalizing the cost of using the third-party car services.
With the help of a mobile app, Walmart will call an Uber or Lyft driver to visit its store. The store will hand over the order to the driver and then the driver will knock the customer’s door. Walmart will call the customer to tell them the order is on its way.
The wisdom has told us that shipping works best when it’s not just saving time for the customers but also money. The idea that you are not going to pay “much” for your convenience is always alluring. Amazon also has its AmazonFresh service which delivers groceries including perishable items like dairy, meat, and fish, for delivery within 24 hours. But it comes at a hefty price. You have to pay $299 to become a member of that service. Walmart’s $10 service sounds paltry in that context and that’s precisely why it will undercut the rivals.
Wrapping It Up
Indeed, Walmart is in a serious mood to reinvent itself and the only way to do so is to strengthen its footprints on the landscape of the retail world. Their management seems to believe that a better delivery system is one of the major forces that will help it in achieving that goal. The veterans will know that this is not the first time that Walmart has experimented with grocery delivery. It has its own long run grocery delivery setups in both Denver and San Jose, California. But it has failed to move ahead with those setups.
Besides this new change in delivery fulfillment, Walmart has announced several other large changes recently. There’s been a shakeup in leadership, as the CEO of Walmart China has just been tapped to replace the CEO of Asda—Walmart’s grocery chain in the UK. Furthermore, Walmart Canada has decided to no longer accept Visa cards in its stores, in a move designed to protest the credit card company’s high fees.
Additionally, it’s just come to light that Walmart has an unusual drone testing project in the works. Rather than using them to deliver orders, as has been the case with most retail drones, Walmart is using them as part of quality control operations. Camera-equipped drones are observing some of their fulfillment centers to ensure that the correct goods are being sorted into their appropriate bins.
With all these developments, Walmart should see some improvement in its online reach and efficiency. Even if it outperforms Amazon’s Amazon Fresh grocery delivery, it will still have to contend with services like Instacart and Google Express.