Walmart deal shows it’s serious about same-day delivery

Discussion
Jesse Kaplan, CEO and Founder of Parcel - Photo: Walmart
Oct 03, 2017
George Anderson

Walmart’s decision earlier this year to offer discounts on more than a million products purchased online and picked up in its stores was an acknowledgement that home delivery is an expensive proposition for retailers. Today’s news that Walmart has acquired Parcel, a same-day delivery service based in Brooklyn, NY, is also an acknowledgement that there are plenty of people who want online orders delivered to their homes — quickly, in many cases — even if it costs more.

The Parcel acquisition is relatively small on the scale of recent deals by Walmart going back to the $3.3 billion it paid to acquire Jet.com last year. Parcel specializes in same-day and last-mile delivery to customers in New York City. The service counts Bonobos, also acquired by Walmart this year, and meal kit companies Chef’d and Martha & Marley Spoon as customers.

Nate Faust, senior vice president, Walmart U.S. eCommerce supply chain, wrote on a company blog that he sees the acquisition driving same-day deliveries for the retailer in the local market. Parcel makes same-day deliveries in scheduled two-hour windows around the clock, seven days a week.

“Jet has been testing free same-day delivery of certain orders to customers in New York City,” wrote Mr. Faust. “We can build upon that and plan to leverage Parcel for last-mile delivery to customers in New York City — including same-day delivery — for both general merchandise as well as fresh and frozen groceries from Walmart and Jet.”

According to Mr. Faust, customers have significantly changed their expectations about home delivery in recent years.

“It’s why we’ve focused on creating more options to meet their needs, such as our free two-day shipping to home, our pickup discount and free online grocery pickup service,” he wrote. “It’s also the reason we’ve been testing a number of different innovations at Walmart and Jet to further enhance how we serve customers even faster, with programs ranging from associate delivery to in-building and in-fridge delivery with Latch and August Home.”

DISCUSSION QUESTIONS: What do you make of Walmart’s acquisition of Parcel? Do you see demand for same-day delivery growing in more densely populated communities around the U.S.?

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Braintrust
" The acquisition of Parcel and the NYC test is a necessary survival step."
"It is the first acquisition by Walmart.com that I can think of that is about logistics."
"I predict their biggest problem will be keeping drivers on the job as they will get burned out in a New York minute."

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24 Comments on "Walmart deal shows it’s serious about same-day delivery"


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Ken Lonyai
BrainTrust

Parcel is a nice addition to Walmart, but to deliver in NYC and rural Iowa are two very different prospects. The cost of 24/7 two-hour interval deliveries in remote regions is not sustainable, so in its efforts to play catch-up to Amazon and develop its own service strategy, Walmart is going to have to determine what services are viable where and under what conditions, for the long-haul.

It’s likely that customers in regions that don’t get all the perks will feel antagonism towards Walmart (or others) that effectively discriminate against them, based on geography.

Mark Ryski
BrainTrust

Walmart’s acquisition of Parcel is consistent with its strategy of innovation and evolution of services to meet changing and emerging consumer needs. It’s clear that demand for same-day delivery will continue to grow and so investments in last-mile delivery services like Parcel makes good sense for Walmart.

Sterling Hawkins
BrainTrust

Especially with their newfound innovation culture that is keen to try new ideas, engage with new technologies and acquire companies consistent with where they’re headed as a business. They understand that technology is a key and growing part of how to improve the customer experience and that’s what this is all about. Smart move for Walmart.

Phil Chang
BrainTrust
Phil Chang
Retail Influencer, Speaker and Consultant
1 year 6 months ago

Nothing but good things will come from this. The spotlight has been on Amazon and how good they are at logistics. Don’t forget that Walmart was Amazon in the ’90s. They pioneered moving packages FAST through warehouses and figured out ways to display quickly and efficiently.

Acquiring Parcel allows Walmart to compete head-to-head with Amazon. As with all things retail these days, these initiatives make life better for consumers. Can’t celebrate that enough — retail has spent long enough not focusing on consumers.

Art Suriano
BrainTrust

Walmart is smart to purchase Parcel. Walmart understands that today there are many different types of customers. There are those who prefer to shop in-store only, online only or a mix of both. We have customers who like to buy online and then pick up the item in-store and those who want it delivered. Today it’s all about offering customers what they want. Walmart has continued to create as many options as possible for their customers offering them great conveniences. So if a customer wants fast in-home delivery and when necessary needs to pay a little extra for it, they should have that option. Parcel is another service that Walmart will be able to offer to its customers and it will be successful.

Max Goldberg
Guest

Walmart realizes that it’s often better to acquire a company than to try to build in-house. In densely populated areas, like Manhattan, it makes sense to offer delivery. If Walmart wants to maximize relevancy in these areas, it needs to adapt — and today adapting means offering delivery.

Peter Fader
BrainTrust

This is an interesting but very risky move by Walmart. It goes against their usual mantra of maximizing efficiency and avoiding unnecessary overhead/complexity. So I’m not saying that it’s a bad idea, but it does seem to be inconsistent with the kinds of decisions/investments they tend to make.

Ben Ball
BrainTrust

I’d say it means they are seriously “thinking about it.” Parcel in and of itself isn’t much of a dent in the home delivery market, even with NYC, but it is a great petri dish. Walmart has a history of toe-in-the-water testing and, outside of jet.com, we are simply seeing that continue in the e-commerce/delivery space.

The way this fits into the larger picture of how retailers learn to understand and serve consumers’ core motivations in shopping is intriguing though. Retailers seem to have been looking for some halfway measure — any halfway measure — that could satisfy convenience short of outright same-day home delivery (preferably “free,” which I believe subscription or membership services qualify as perceptually). That is understandable given the economics involved. But once consumers have bitten the Prime same-day service apple that horse has left the barn. And it is gone folks. No halfway measures need apply. Figure it out.

Zel Bianco
BrainTrust

People in urban markets like NYC will always want convenience so the demand will be there. What would concern me is the logistics as NYC has never been more congested than it is now. More Ubers, more tourists, more Citi Bikes, more messengers going the wrong way, more construction, more closed streets and no way to get around these obstacles. Parcel will need to figure out a way that gets groceries and other items from point A to point B and there will not be a special lane set up for this. I predict their biggest problem will be keeping drivers on the job as they will get burned out in a New York minute.

Adrian Weidmann
BrainTrust

We live in a nanosecond world where we expect immediate gratification. When you enter your credit card number in your online cart and confirm your order, the shopping experience isn’t quite finished. In order to get that rush that comes with a purchase made in a physical store — where you can carry your “prize” home, same-day delivery is finding a receptive shopping audience. Shoppers will embrace same-day delivery as services become more prevalent and competitively priced.

Seth Nagle
BrainTrust

I see this as a great pilot program opportunity for Walmart. By acquiring Parcel, Walmart can just jump into one of the busiest markets available and start learning/playing around with different strategies without having to build an entire distribution supply chain.

Same-day delivery is very attractive for today’s consumer, I’m just not sure if the price points match up.

Michael Day
BrainTrust

This acquisition and the recent news on the expansion of Jet.com Shopping Club does have Walmart targeting urban Millennials with perhaps that much more focus after the Amazon acquisition of Whole Foods, etc.

Manish Chowdhary
Guest
There is no doubt that demand for same-day delivery is growing in NYC, perhaps the most densely populated community(ies) in the U.S. An acquaintance said to me just yesterday, “Thank you Amazon! When my son says, ‘Mom, I just drank our last water,’ I receive a new delivery within 2 hours.” For Walmart, buy online pickup in-store was a very smart move, leveraging one advantage Amazon did not have (until now) — stores. The acquisition of Parcel and the NYC test is a necessary survival step. Amazon offers Prime customers three or four different delivery options — including same-day delivery. Studies have shown that more shipping choices generate higher conversions, even if only a small fraction of shoppers choose that option. Walmart must, at a minimum, test same-day delivery and find ways to make it profitable. The risks of not testing and perfecting this approach are too high to ignore, while the downside risk of testing, even if they fail, is relatively low. The fastest way to get a test in motion was to acquire… Read more »
Brandon Rael
BrainTrust

For the NYC, Boston and San Francisco cosmopolitan hubs, the strategic move to acquire Parcel is outstanding as it helps to close that critical last mile, which is now the Holy Grail of retail fulfillment and customer satisfaction. Walmart continues to cultivate both online and fulfillment strategies to compete head to head with Amazon and, as we know, competition will ultimately benefit the customers … with choice.

However as most on this panel could agree upon, though same-day/next-day shipping strategies may work wonders in NYC and other cosmopolitan cities, it is neither a viable or realistic model in the rural parts of our country. It will be interesting to see how this plays out in the long run.

With that said, Walmart continues to build a very impressive portfolio of digital native brands (jet.com, Bonobos etc), and the acquisition of Parcel is well in line with their long-term strategies.

Harley Feldman
BrainTrust

Great acquisition. Walmart continues to press on in customer service and push back against Amazon. One of the biggest differences that Walmart has is more than 4,000 store locations which are used as mini-warehouses and can support two-hour delivery. Between Parcel and jet.com, Walmart will learn quickly about home delivery and have the capability as part of its services to its customers. This area of same-day delivery will continue to grow as most people will trade cost for convenience and service in today’s busy world.

Michael La Kier
BrainTrust

The last mile has been a pretty big stumbling block for many businesses, so this is an important step, but not the complete answer. For dense, urban areas same \pday delivery works nicely (assuming scale that allows for multiple trips vs. one offs). For other areas, this is a VERY expensive proposition that must be supplemented with click-and-collect and other models.

Richard J. George, Ph.D.
BrainTrust

The final mile battle and experiments continue. I’m not certain that this is so much of a test of another potential delivery option as it is an attempt to demonstrate to the market that Amazon is not the only logistics innovator.

Ken Cassar
BrainTrust
Ken Cassar
Vice President, Principal Analyst, Rakuten Intelligence
1 year 6 months ago

Two things struck me as interesting about this deal: 1.) It is the first acquisition by Walmart.com that I can think of that is about logistics. In the past, Walmart’s online acquisitions were of retailers or of technology providers. 2.) This is a clear signal that Walmart is looking to hit both the affluent online shopper (who will pay extra for immediacy and convenience) and the less affluent customer (who will likely use a service like Walmart Grocery, where there are no delivery fees). Walmart may be one of only a few retailers that has the resources to try to be all things to all people. At least Walmart hopes so.

Ralph Jacobson
BrainTrust

It’s all about economics. Retailers must extract costs where ever possible. Consumer demand will continue to be driven by instant gratification, so Walmart and other retailers are doing exactly the right thing. Good move!

Lee Peterson
BrainTrust

Walmart and Best Buy are the only pre-ecom retailers out there who have drawn a line in the sand and said, “Dear Amazon, we’re going to compete with you.” This is especially true on the PR front, as evidenced by this story/acquisition. 1/2 progressive movement, 1/2 PR. To compete with AMZN on the news front is just about as important as actually leveling the retail playing field, especially to investors, who are focused on innovation more than ever. Good move all the way around.

Jackie Breen
Guest

Walmart’s acquisition of Parcel is another great move for the company. Customers demand options when it comes to delivery and the ability to offer same day delivery will allow them to effectively compete with Amazon, who is currently trying to provide the same service.

The question will be, can Walmart offer same day delivery to their consumers outside of heavily populated cities (and do so in a manner that is profitable). Given the number of Walmart stores and their locations in rural areas, Walmart has a strong advantage if it can effectively utilize all of these distribution points.

Shep Hyken
BrainTrust

Walmart knows who its competition is … Amazon. Amazon is the most convenient company on the planet to do business with. The only way to compete beyond what Walmart has done is to be more just as — if not more — convenient. The same-day delivery is one way to answer that bell.

Ed Rosenbaum
BrainTrust

I give Walmart credit for the continual exploration of ways to be more competitive with Amazon. Parcel can be a good acquisition. But it might be a test or experiment to see if faster home delivery is a viable option that consumers are willing to pay for. Home delivery will continue to grow. The question is at what expense and who will pay for that expense?

Ken Morris
BrainTrust

Walmart understands that consumers will soon expect same-day delivery as the normal lead-time for most products. The acquisition of Parcel is a great way to accelerate the development and optimizing the processes for same-day delivery. With this acquisition and honed skills, Walmart will be able to replicate this process and scale it to many other cities.

Walmart is not alone in the drive for retailers to offer same-day delivery. According to a new survey from BRP, 51% of retailers indicate they currently offer same-day delivery, up from 16% last year, and within two years 65% plan to offer this service. Delivery via a third-party service, such as Uber or Lyft has also increased (from 20% last year to 32% this year) as retailers look at different ways to offer customers the flexibility to shop, purchase and receive their goods on their own terms. Download the free report here.

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Braintrust
" The acquisition of Parcel and the NYC test is a necessary survival step."
"It is the first acquisition by Walmart.com that I can think of that is about logistics."
"I predict their biggest problem will be keeping drivers on the job as they will get burned out in a New York minute."

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