Photo: Home Depot; Source: Walmart
Is Home Depot’s deal with Walmart a sign of bigger things to come?
Home Depot is hiring Walmart to handle local deliveries for its stores.
The retailers revealed today that they are teaming up to give Home Depot’s customers another way to have their online orders delivered on the same or next day. The two companies did not specify details, such as the length of the agreement or their financial arrangement.
The development marks the first publicly announced retailer deal for Walmart’s GoLocal delivery service, which debuted in August. The white label service, which uses third-party drivers, delivers orders for other businesses across the country. Walmart had said that it signed deals with both national and smaller accounts when it launched GoLocal but did not specify any companies at that time.
Home Depot will begin offering the GoLocal service in select markets in the following weeks with plans to expand its use by the end of the year.
Stephanie Smith, senior vice president of supply chain for Home Depot, said her company “is continuously working to give customers the most convenient shopping experience in home improvement, and that includes providing a wide range of fast and reliable delivery options.”
“This partnership brings us even closer to our goal of offering same-day or next-day delivery to 90 percent of the U.S. population,” she said.
A recent Bloomberg opinion piece suggested that a Walmart and Home Depot merger would make sense since the two companies represent the first and third biggest importers of goods through container ships. Their combined strength would give them the ability to lay claim to containers at a time when many retailers are struggling to get goods into the country.
Home Depot has seen its online sales rise dramatically since the start of the novel coronavirus pandemic. The chain posted an 86 percent increase in digital sales last year and more than half of its orders were fulfilled by its stores.
The home improvement retailer is building a delivery network relying on third-parties to offer fast fulfillment to professional and do-it-yourself customers for jobs big and small.
John Furner, president and CEO, Walmart U.S said, Home Depot shares his company’s goal of “making fast and reliable local delivery available in every community” it serves.
Discussion Questions
DISCUSSION QUESTIONS: What does the Walmart/Home Depot GoLocal deal mean for each company? Do you see a deeper relationship for the two companies, perhaps even a merger, in the future?
Poll
Loading …BrainTrust
Lisa Goller
B2B Content Strategist
Andrew Blatherwick
Chairman Emeritus, Relex Solutions
Convenience and speed are key in home improvement as people doing tasks often need products in a timely manner. As such, this is a good move that gives consumers another option to quickly get Home Depot orders. It also saves Home Depot the hassle of building out all the capacity to offer fast local delivery. For Walmart, it’s a good win that adds a lot of volume to its new service – which it needs if it is to build out fulfillment capacity in a way that competes with Amazon. As for a merger between Home Depot and Walmart, predicting this on the basis of the current supply chain crisis makes no sense at all. Supply issues are a difficult temporary problem, not a reason for companies to undertake mega-mergers which should be based on much wider commercial and strategic considerations.
Non-competing retailers have collaborated on marketing and merchandising almost since the beginning of retailing. Until they start competing head-to-head. Thousands of supermarkets and drug stores shared strip mall space and often cross merchandised until the supermarkets decided to add pharmacies. Then it was war and the drug stores moved to stand alone real estate and started adding grocery items. As soon as there is a whiff of Walmart expanding its DIY or garden sections in a meaningful way, this relationship is done.
This is a smart move to help control a disrupted supply chain. Given that Walmart and The Home Depot are two of the top three importers from China, it makes sense to control the product from its source all the way to the consumer. The last mile is the universal problem, so why try to go it alone? It’s a win-win for Walmart, as it adds another revenue source which should also allow it to increase its delivery infrastructure.
Good points Ken. As Walmart builds out its last-mile delivery services, economies of scales will help them manage the costs. Walmart’s GoLocal delivery program may be a good delivery option for small chains and large chains that don’t directly compete with Walmart. It gives retailers another delivery option to compare to existing services.
Very good points, Ken and David.
Killer move for Walmart.
Good near-term move for consumers.
Hopefully it will also prove to be a good long-term move for consumers. Minimally, there will be two retail powerhouses (instead of one)!
This is a smart move for both companies. Retailers evolving with the times are forgoing a fear of cannibalization when uniting with indirect and even direct competitors. These are the types of decisions that will maintain and further relationships with customers. I could see a deeper relationship for Walmart and Home Depot given that they have overlapping consumers and market locations, but I don’t think a merger makes sense considering how strong both brands are already on their own.
EDLP is now supporting DIY same-day delivery. This is great for consumers who can’t get to a Home Depot location but need its products for a home project. For Walmart, clearly this adds another mega revenue stream for its business and opens the door for many medium and smaller sized retailers to join in on this new delivery service model. I think a key question for many aspiring DIYers is, does this degrade the in-store experiential aspect of visiting a Home Depot (a big part of the equation) AND will this result in lower overall basket sizes due to decreased impulse buying behavior (because they’re not in-store)?
Huge deal. Walmart gains even more negotiating power and Home Depot gains speed and agility as the home category explodes.
If this collaboration proves successful, an eventual merger is possible. There’s minimal overlap in their core offerings and their union would create a new retail powerhouse.
This is a triple win for all parties. Walmart quickly gains needed critical mass for delivery efficiencies, while Home Depot gets into the delivery business much more quickly than if they did it by themselves. And customers now have access to home improvement product by delivery. This move in and of itself is not necessarily an indication of a merger, but one has to guess that there are other efficiencies available under that kind of scenario. The two business would not cannibalize each other at all. They simply extend their reach to a very broad family/lifestyle offering. These guys might not be marriage bound yet, but it sure looks like a high profile prom date.
I don’t see the merger but I do see an interesting concept developing, and that is the collaboration between two very large retailers in a business process – fulfillment and delivery – that only a few years ago would have seemed unthinkable (I think).
This is a logical move for both companies, and helps both strengthen the delivery value proposition they both offer compared to Amazon. The power of using stores to fulfill orders and offer speedy delivery remains strong. The agreement also shows how Walmart is looking to monetize the capabilities it is building, which is a positive in the long run.
Let’s look ahead five years. Does this mean that GoLocal will become a major challenger to FedEx, UPS and USPS? This is a perfect domino play.
Do the simple SWOT analysis. This is turning opportunities into strengths, and turning weaknesses into opportunities. If one looks at the animation of Mickey Mouse and its growth to become the biggest media company in the world, it shows the same kind of thinking. We can apply it all to that online bookseller that became Amazon.
As for the acquisition of Home Depot by Walmart, it makes sense for all the same reasons.
This kind of out-of-the-mainstream thinking is what will keep retail relevant as the world changes and shopping habits morph. Consumers are clearly in charge and retailers need to find ways to meet their demands.
I’m not sure this is such a big thing – Home Depot just outsourced delivery. Lots of companies outsource pieces of their supply chain to UPS, FedEx, AWS and Microsoft (for logistics programming). As for efficiency, all Home Depot has done is add another layer onto the delivery side of the supply chain – consumers would benefit more from Home Depot cutting their own deals.
Simply put, this partnership solves problems for both retailers while also serving the needs of consumers. For Home Depot, delivery of a large couch or appliance may take well over a week depending on if there is even inventory nearby. By reducing this time frame considerably and winning both on speed and convenience of scheduling deliveries, Home Depot will be able to generate more loyalty with customers. For Walmart, this rapidly expands the scale of their GoLocal service and immediately increases their share of the $83 billion parcel delivery market. Consumers win because they will have more options to have same- or two-day delivery of their DIY materials, furniture or appliances across a larger portion of the country.
There is a big difference between delivering groceries and small items and delivering larger home improvement products. I am sure this has all been sorted out and it makes sense that the largest retailer in the U.S. has built a delivery network that others can only dream of. If it is available to other retailers, why not make use of it?
At what point does a deal like this, particularly if it also moves on to include shipping containers, become anti-competitive? Two of the largest retailers working together in this way will certainly make it harder for other competitors to offer the same service or get their goods internationally.
I am sure this will help Home Depot deliver better service to customers and will also make Walmart’s GoLocal service more profitable. A big win/win — for them at least.
The fact that The Home Depot is using Walmart for distribution is a testament to the challenges of last-mile delivery.
For Walmart it offers an additional revenue stream and more brand awareness (if Walmart drivers use branded trucks like Amazon). For The Home Depot it’s a great way to diversify their carrier strategy – particularly given the delays and volume limits retailers experienced last holiday season.
I’m not sure it will result in a merger, but I expect we’ll see a lot more partnerships like this in the future. One of the big challenges for brands who want to go direct-to-consumer (DTC) is how to scale parcel delivery when they don’t have that experience. Walmart’s service could give them a way to outsource that (maybe even via a “ship to Walmart store for delivery” model).
The modularization of the retail stack continues. There are too many things a retailer must do well to be successful and outsourcing non-core areas makes sense. The fact that Home Depot is sharing customer data with Walmart is a sign they think the competitive threat is low, which is surprising. Is that an indication of a merger in the future? Maybe. But it’s a huge validation for Walmart’s delivery service with third-party retailers.
Given the ongoing concerns regarding logistics, supply chain and final mile costs, this deal makes sense for both companies. In addition to the advantages noted in the article, this deal provides a defense against the continued innovations pioneered by Amazon.
I do not anticipate a merger between the two. It may be something preferred by Home Depot, but I doubt Walmart sees the same advantages.
Let’s not get ahead of ourselves: no, I don’t see a merger. OTC, I envision just the opposite: the delivery service is successful — being used by more and more companies, becomes an operation unto itself, and Home Depot decides to spin it off.
This is a smart move as Walmart seeks to find partners to partner with when it comes to the logistics part of the retail solution. By partnering up with other retailers, Walmart keeps costs low, controls their own logistics offerings, competes against other providers, and enables their customers to enjoy the latest and best logistics offerings available. This is a win-win-win for everyone as Walmart recognizes that it is an essential provider in the entire retail solution.