Walmart goes big, goes nationwide with online grocery deliveries

Discussion
Image: Walmart
Mar 14, 2018
George Anderson

Walmart currently offers online grocery deliveries in six markets. By the end of the year, more than 40 percent of all U.S. households will be able to have groceries delivered to their door as the retail giant expands the service across the country.

“Ninety percent of Americans live within 10 miles of a Walmart store, and we serve more than 150 million customers a week, which gives us a unique opportunity to make every day a little easier for busy families,” said Tom Ward, vice president, Digital Operations, Walmart U.S., in a statement. “Today, we’re expanding this promise by helping even more customers save time and money without leaving their homes.”

Walmart’s service, which promises the same everyday prices online as in stores, will be available on its website at walmart.com/grocery and through the its mobile app. Customers pay a $9.95 fee on orders of $30 or more.

Online grocery orders at Walmart are picked by personal shoppers in its stores. The retailer, which currently employs more than 18,000 personal shoppers, plans to add thousands more as it expands home delivery this year. Personal shoppers go through a three-week training program to learn how to select the best produce and meat for customers.

Delivery of online orders will be handled by Uber and other providers. Online grocery customers are very important to the retailer. In the past, Walmart CEO Doug McMillon has said that online grocery shoppers spend nearly twice that of those who shop in its stores alone.

The move by Walmart to expand its grocery delivery service is likely to be seen as a way for the retailer to head off Amazon’s Prime Now, which offers free deliveries to members within two hours. Walmart’s new program, which includes an option for same-day delivery for orders placed by 1:00 p.m., does not require a subscription.

Walmart also faces a growing challenge from Target, which is expanding online grocery deliveries using Shipt, which it acquired last year. Target has announced plans to make the service available to the majority of its stores by the 2018 Christmas selling season.

DISCUSSION QUESTIONS: What impact will Walmart’s nationwide rollout of online grocery delivery have on consumer behavior and its business rivals? Will Walmart’s program prove to be a tipping point for online grocery deliveries in the U.S.?

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Braintrust
"Walmart needs to do this to defend market share and to future-proof its business, but it comes with costs attached."

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17 Comments on "Walmart goes big, goes nationwide with online grocery deliveries"


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Lyle Bunn (Ph.D. Hon)
BrainTrust

The stars of grocery delivery really need to align in order for this service to shed the light of profit on the business. It requires a population that is less mobile and can pay for the personal shopper and delivery service, as well as quality in produce and grocery products. The merit and outlook hinges on the value that consumers place on their time.

Art Suriano
BrainTrust

Walmart has remained successful because they know where their attention needs to be in today’s retail world. Delivery of online shopping is where the competition has their focus today, and Walmart is smart to see that. They will no doubt be successful with their online delivery services and give all competitors a run for their money. However, the more we take the in-store experience away, the less opportunity we have for impulse buying and human interaction. So Walmart should look for incentives to bring the shop-at-home customers into their stores, if only occasionally. Even with all the conveniences of shopping at home, retailers will need both the great online experience as well as the in-store experience to keep their brand sharp and ahead of the competition.

Max Goldberg
BrainTrust

With Amazon, Walmart and Target all offering grocery delivery, the pressure is on traditional grocers to do the same, even though most consumers have yet to use this service and the profits from delivery are minimal at best.

Phil Masiello
BrainTrust

Walmart has the potential to change the delivery game for groceries. They have the logistics in place to leapfrog their competitors in this channel. It will come down to execution and customer satisfaction with the value proposition.

Grocery delivery has been difficult for many retailers as the costs have been prohibitive and consumers are unwilling to subsidize the additional expense. It comes down to an efficient supply chain and distribution network. Only Walmart and Amazon have that in place. But Walmart clearly has the advantage of having stores everywhere.

Brandon Rael
BrainTrust

There are so many moving parts, partnerships and dependencies to make this a truly impactful and profitable part of the Walmart business. Grocery delivery is picking up momentum in very cosmopolitan cities such as NYC, Boston, etc., however, the majority of the suburban or rural customers enjoy shopping for their own groceries, and may not see the value of another delivery upcharge and a personal shopping assistant.

The major players — Amazon, Target, and now Walmart — are in this game and the competition is heating up. For the customer, it’s a balancing act of taking ownership of their own grocery shopping, or simply outsourcing it to a personal shopper and paying an additional fee for the convenience.

Neil Saunders
BrainTrust

Walmart’s push into home delivery will no doubt help boost the penetration of overall U.S. online grocery sales. It will also encourage rivals, like Kroger, to expand their delivery services further and faster.

That said, the $9.95 fee is likely to be off-putting for some. There is still enormous resistance to delivery charges, particularly for medium-sized orders where such charges represent a fair proportion of the overall cost.

Of course, the elephant in the room is profitability. Even with the $9.95 fee, this initiative is likely to be margin-eroding. The blunt truth is that online, especially with last-mile delivery to homes, is not particularly profitable.

Walmart needs to do this to defend market share and to future-proof its business, but it comes with costs attached.

Seth Nagle
BrainTrust

I’ll believe it when I see it, this sounds like a logistics nightmare but if anyone could pull it off it’s with Walmart or Amazon.

The biggest part that generates my skepticism is “Delivery of online orders will be handled by Uber and other providers.” With third parties involved lots of issues can arise and with shoppers ready to jump online and tweet about problems Walmart needs to be ready.

As for other retail grocers if they are not working on their own grocery delivery/click and collect model by now they might be out of luck.

Lee Peterson
BrainTrust

This is a necessary chess move by the world’s largest retailer (for now). If you think about it, take grocery out of the equation there (i.e.: Amazon starts prolific shipping of groceries to everyone’s house) and Walmart is nothing more than a less convenient copy of said 900 pound gorilla. Who as you all know, just increased their revenue by $100 billion in the last three years. In other words — the writing’s on the wall: people LOVE shopping at Amazon, so you obviously cannot be less convenient or less anything if you want to slow that freight train down or, for that matter, even keep your own.

Having said all that, this is still a GREAT move by Walmart. Beat them to the punch if you can. Cost at this point is not the issue. It’s first to market/market share that’s at stake in the biggest arena possible.

Mohamed Amer
BrainTrust

Walmart’s national grocery delivery announcement is a watershed moment for grocery.

The Walmart brand has always been about delivering value products at an affordable price. It targets a large swath of the population and requires broad adoption to succeed — as it has over the past decades. By going all-in for a nationwide rollout of online grocery delivery, Walmart is turning that element of the value proposition into table stakes.

Walmart’s bold move is a shot across Amazon’s bow and a warning to others that they must make further investments in a new model of value delivery for the grocery customer.

Gene Detroyer
BrainTrust

I don’t know when it will happen and neither does Walmart, but it will. Home grocery delivery will be the standard in grocery shopping. Maybe five years. Maybe 15 years. While today there are hurdles to get over, those hurdles will be jumped and you and I (well, maybe our sons and daughters) will order the bulk of their groceries online and have them delivered and never again go to the store.

Retailers have been notorious for being late to changes in consumer behavior. Amazon saw the future (and no it wasn’t price) and Walmart is doing the same.

Ryan Mathews
BrainTrust
I think we need to deconstruct this a bit. A $9.95 surcharge on a $30 sale is almost a 33 percent price increase. And that says, “always low prices,” how? Also, as all loyal Uber riders know, depending on where you are, Uber and its drivers can be charitably described as a crapshoot. I’m not sure I would like to see some of the men and women who have hauled me around various cities show up at my door. All that said, the idea of cost-effective home delivery still seems to be the Holy Grail of the online grocery industry, so it will be interesting to see what happens. I’ve long maintained that any delivery system is only as strong as its weakest link. Companies like FedEx and UPS which have excellent screening programs still get caught on home security cameras tossing and kicking boxes and other less endearing behaviors. What happens if what’s inside that box isn’t a down comforter but rather a half dozen bananas, a dozen eggs and a cake? These caveats… Read more »
Joel Goldstein
BrainTrust

This is truly a game changer. With Walmart’s low price promise combined with the convenience of Amazon, Shipt and InstaCart’s delivery, it will be changing the competitive landscape very quickly …

Sterling Hawkins
BrainTrust

This is more of a land grab than a benefit to Walmart’s P&L at this point. They’re trying to lock in market share before Amazon rolls out more physical stores and Target sorts their Shipt integration. I think it’s a good move, albeit an expensive one.

Mark Price
BrainTrust

While Walmart’s strategy makes sense from a marketplace environment, I have to wonder about the size of the Walmart customer segment that will want to purchase groceries online. Groceries have been the slowest product line in terms of online adoption in general and I am not sure that the Walmart service has any benefit beyond ubiquity, to drive trial. The price may also be a barrier.

I am not optimistic, but eagerly await the results of this effort.

Camille P. Schuster, PhD.
BrainTrust

Of course competitors will be watching to see if this venture is successful and profitable. If they are not already experimenting in this space it will be too late. While one study may show that consumers buy more groceries online, do they also purchase the other items that in store shoppers purchase? Of course this online market is important and needs to be explored. This expansion move means Walmart has had some success with this approach so competitors need to take notice.

Shep Hyken
BrainTrust

We have reached a tipping point. Grocery delivery, while some may still call it a luxury, is becoming the norm for many consumers. Deliver of anything and everything is actually the norm, so there is no reason why groceries should be left out. The logistical issues dealing with perishables has been worked out. The cost is down from what it used to be. More and more consumers have used the service. It’s a short matter of time before this is standard for many grocery stores and supermarkets. With Walmart’s big footprint, it puts the majority of consumers within reach of enjoying this service.

Min-Jee Hwang
BrainTrust

This appears to be another example of Walmart aiming to attract customers with higher incomes. The level of convenience they are able to offer due to their prime store locations makes success more viable that other competitors in the market. But this industry is just getting started. Online grocery’s share of the market hovers between 2 and 4.3%. There’s a long way to go and positioning itself as a leader in the space will pay dividends for Walmart if this new delivery program takes off.

wpDiscuz
Braintrust
"Walmart needs to do this to defend market share and to future-proof its business, but it comes with costs attached."

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