Walmart Joins The Battle For Grocery Delivery

Walmart’s announcement that it will expand its home delivery program may be one of the smartest recent moves for the chain as it puts itself in a powerful position in grocery.

March 15, 2018

Walmart’s announcement that it will expand its home delivery program may be one of the smartest recent moves for the chain as it puts itself in a powerful position in grocery.

There are two parts to this announcement. The first is that Walmart will offer grocery delivery to 100 cities by the end of 2018, using Walmart employees to pick the groceries and delivery services, including Uber, to make the deliveries. The minimum order is $30, with an additional $9.95 charge per delivery.

The second part of the announcement is that Walmart will be using its Jet.com division, based in Hoboken, New Jersey, to offer same-day delivery in New York City, where Instacart, Amazon, Fresh Direct and Peapod currently offer the service. The New York City service is an interesting one as Jet.com’s private-label offerings are more upscale than Walmart’s and come in hipster-type packaging that appeals to a very different customer.

Walmart's home delivery breaks the barrier for many shoppers who have shunned the brick-and-mortar chain for its more downscale image but would like to reap the benefits of its low prices. Walmart earlier this month launched a new meal-kit program and One-Step fresh prepared foods, a perfect fit for home delivery.

As more retailers step up to offer grocery delivery, companies like Instacart are signing up more retailers across the nation. And in an interview I had with Apoorva Mehta, Instacart’s founder and CEO, at the company's offices in January, he told me he is focused on expanding the services the company offers to retailers.

A Forrester Sector Spotlight entitled Grocery Grows For Urban, High Income Customers, released this morning, estimates the total U.S. grocery sales market in 2017 at $848 billion, an 18% CAGR since 2012. Various estimates peg the current percentage of groceries ordered online and delivered to be between 2% and 4%. The report also surveyed 991 U.S. adults who buy groceries online and found that 54% buy at Walmart, 47% at Amazon Fresh and 29% at supermarkets. While the survey sample is small, it does reinforce that Walmart has an opportunity to expand to a larger customer base.

The Food Marketing Institute and Nielsen predicted at the FMI’s Midwinter Conference in January that online grocery shopping would reach $100 billion by 2022 (which would make up about 10% of all grocery sales). PWC Global reports that 70% of shoppers globally still prefer to purchase groceries in a store, the highest of all product categories, with a further 23% purchasing online; 33% of global shoppers said they made "some" grocery purchases online in the last 12 months.

One question I have is if the need for home delivery is actually as large as the infrastructure that is being built. Many shoppers do not want to invite strangers making deliveries into their homes; others (I being one) report that, too often, the person picking their groceries do not have the skills to pick quality produce, and then there are those who are so busy that scheduling a delivery time is impractical.

There is also the question of whether having all these delivery services will create competition for qualified labor that may start another battle to win over drivers from competitive services with higher wages and benefits, which in turn would drive up the cost for delivery.

Supermarkets are being smart about using tech-driven solutions that go beyond delivery, including mobile checkout in-store, curbside pickup and lockers, which solve the problem that many people have: standing in a checkout line. The markets are also remodeling and upping their game with retail dietitians and grocerants and are trying to become the center of their community. So while home delivery will grow, don’t count out brick-and-mortar stores just yet.

 

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