Photo: Walmart
Will crowdsourced service help Walmart nail the last mile of grocery deliveries?
Walmart, like many of its rivals, continues to search for ways to solve the various challenges around last-mile deliveries. Its latest attempt — Spark Delivery — involves using a crowdsourced driver service to deliver groceries to customers.
The new system operates with independent drivers who sign up to make deliveries during windows of time that work best with their schedules. The drivers are managed by Delivery Drivers, Inc., a firm that specializes in last mile contractor management. Drivers have access to order details, navigation assistance and other features to effectively and efficiently carry out their tasks. Walmart uses its own staff of personal shoppers to pull together orders for drivers to pick up and deliver.
Walmart is currently carrying out the Spark Delivery pilot in Nashville and New Orleans with plans to expand the test to more metropolitan markets before the end of the change. From the customer’s vantage point, nothing should appear to change. Walmart offers grocery delivery with a $9.95 delivery fee on all orders with a $30 minimum.
The new test is part of Walmart’s goal, announced in March, to offer grocery delivery to more than 40 percent of U.S. households by the end of this year. It offers online ordering with in-store pickup at more than 1,800 locations with a goal of expanding to 2,100.
“Our customers love Grocery Pickup and Delivery — it offers convenience paired with the everyday low prices customers expect from us,” said Tom Ward, vice president, digital operations, Walmart U.S., in a statement. “We’re always looking for the best ways to serve them, so we’re exploring a number of different options for getting groceries from our stores to the customer’s front door — some in-house, some third-party.”
The retailer comes off its most recent quarter in which grocery and online sales played significant roles in driving a 4.5 percent increase in Walmart’s comp numbers, the highest quarterly increase for the chain in more than 10 years. The only blip in an otherwise strong quarter was a 17-basis-point decline in gross profit.
Discussion Questions
DISCUSSION QUESTIONS: Will the use of third-party services as in the Spark Delivery test be the most effective and efficient way for Walmart to deliver online grocery orders? How does Walmart compare to its rivals in terms of figuring out how to make home delivery work for its customers and its own bottom line?
Poll
BrainTrust
Michael La Kier
Vice President, Brand Development - IGA, Inc.
Adam Silverman
SVP Marketing, Theatro
The future of retail is testing. Retail, marketing, sales … we are all scientists now. Good for Walmart for continually trying new things. This is especially true given that the last mile is such a large cost. There is no golden answer. The next few years are going to be exciting and revolutionary. We will see third-party services like Spark, robot delivery, Uber/Lyft perhaps and others we have not yet seen. Walmart is on the right track and doing the right thing — experimenting! Keep it up.
You have to commend Walmart for continually trying to figure out how to make delivery work for them. My concern is, will it be worth it? The last paragraph says it all: gross profit declined 17 percent. The problem with delivery is it’s very costly. Moreover, based on overall numbers, we’re not seeing high percentages of customers taking advantage of grocery shopping online. Other items yes, we expect to get delivered, but for non-grocery items as I said before, the speed of delivery is not as crucial as some retailers think.
Walmart and all retailers need to think through the advantages of investing in home delivery, how much it will cost them and reduce profit and which if they will make up for the lack of impulse buying when customers are not coming into the store.
As Tom Ward himself puts it; they throw a lot of tests against the wall and they look to see what sticks. Trying to predict the outcome of this pilot requires a crystal ball, but Walmart can afford to test and fail. The exposure here is that the workforce may be so widespread and miscellaneous and the drivers may be the only Walmart person the customer sees and to whom the customer speaks. Do they want the face of Walmart in the hands of crowdsourced delivery people?
As with crowdsourced auto travel like Uber and Lyft, Spark Delivery has the ability to create for Walmart a low cost capability for delivering groceries for the last mile to homes. The positive side to crowdsourced delivery is the drivers are only paid for the service they provide with no benefits or down time cost that would come with having employees do the deliveries. The possible downside is not finding a crowd sourced person available at the time the delivery needs to be made. This will be less of a problem if other retailers use Spark Delivery to create more demand for the drivers drawing more into the industry.
Walmart is in the lead in home delivery. They have tried and continue to test new methods. They will settle on the methods that work the best ahead of their rivals.
The last mile of delivery is the most expensive and difficult. But right now it is the most important race to win. There are already a number of different pilots in progress. Amazon is recruiting entrepreneurs for Delivery Service Partners who will buy and run their own delivery vans. Walmart’s Spark Delivery is another iteration of home delivery that would seem to be cost effective. At the end of the day, the volume of delivery of the last mile will require multiple solutions. What retailers like Walmart, Target and grocery stores can not afford to do is wait to see who develops something that works. The operative word is “test” in as many scenarios as possible now.
Testing new methods is always a good idea. And Walmart conducts a lot of tests, ranging from the reasonable to the bizarre. What ever happened to the Walmart test in California that had delivery people entering a house to put groceries in the pantry and fridge?
Figuring out how to make home delivery work for shoppers and retailers is complicated. Since there is no one-size-fits-all answer, Walmart is very smart to test options. As long as crowdsourced delivery can be done in a seamless manner it is certainly worth testing.
I’ve been positive about Walmart, but it’s getting ever more difficult to see them that way. Testing always makes sense, but Walmart is flailing about in desperation to stay in step with Amazon.
Employee deliveries on their way home from a shift? Out-of-stock claims when they don’t find free delivery to be viable? Now “crowdsourced” delivery because it’s cheap?
Customer experience is the true differentiator for anyone that wants to be competitive against Amazon (and others) and it’s measured by far more than delivery time frames. In fact, the most important measure of CX is reliability–where shoppers know what to expect EVERY time they engage a merchant, consistently. Walmart by “testing” what are mostly poorly conceived ideas misses the forest for the trees. It’s really not a surprise from a company whose prime directive for decades has not been CX, but cheap prices and any strong-arm tactic to obtain them.
Hey Walmart: give up every which way to try and get around Amazon and craft a meaningful set of customer experiences based on your customers and your own strategy already. Else you will always be at the mercy of Bezos, despite how much cash you have.
At this point no one has truly solved the delivery issue for grocery or at least not on a widespread level. Will third-party delivery be the answer? Perhaps, perhaps not. But Walmart deserves kudos for experimenting with these services. While the amount of money represented in a drop of 17 basis points (0.17 percent) in a company of Walmart’s size in is not small it can’t be solely attributed to the cost of delivery.
Using third-party crowd sourcing delivery services like Spark Delivery is the easiest and quickest path for Walmart to offer home delivery services. Testing it is a smart strategy, as there are definitely risks in trusting third-party or fourth-party individuals to represent your brand.
Eventually, if the volume increases, Walmart may decide to develop its own delivery teams. While it isn’t one of their core competencies today, it may become one.
There are a few different companies testing out some version of the idea of crowdsourcing delivery out to individuals according to their availability — Uber for one, Quiqup is another. So clearly a lot of people see the potential of this idea. I wonder how this will sit alongside Walmart’s own delivery services — will those be reserved for advance bookings of delivery slots and Spark Delivery for last minute on-the-fly orders? The main thing will be for Walmart to ensure the quality and consistency of the service, and the goods, in line with that customers expect from Walmart’s own drivers. What vehicles will they be using? How will they handle frozen and chilled food orders? What if there’s an issue? I can certainly understand this being part of the delivery mix, but want to know more about the nuts and bolts of how it will work.
The importance of last-mile delivery goes beyond the cost. Delivery is the moment of truth for the retailer and the customer-facing connection point. Products can be delivered late, damaged, spoiled, stolen, to the wrong address, in the wrong place and more. How it’s delivered is as critical as when and for a service to work it needs to be tested. Spark Delivery can be successful — think Instacart, Curbside, Uber Eats, and more as third-party services (though not all crowdsourced) that help with the final point of delivery to the customer. The service partially removes the burden from Walmart in the delivery space. What’s truly amazing is that this is not based on Amazon’s delivery capabilities at all — this is part of Walmart’s new test-and-learn thinking, unheard of five years ago.
The “gig economy” is a great way to outsource the final mile. Walmart will have to figure out logistics. This couldn’t have happened just a few years ago. The delivery fee could become a competitive issue. We’ll wait and see on that.
Only time will tell whether this strategy will be the most effective method for Walmart, but it’s a step in the right direction. Trying this out allows Walmart to continue to innovate and explore new options, but they need to make sure they don’t commit to just one solution at this time. For consumers, it’s about variety and quality of service, so it’s not a reach to expect Walmart shoppers to need a seamless, enjoyable delivery experience before this could become popular.