Walmart’s towering ambitions for online groceries delivers a new mate in logistics

SUMMARY:

Walmart is teaming up with Postmates to expand its online grocery delivery service to 40% of the U.S. population.

Walmart’s made no secret of its ambitions in the emerging U.S. online grocery market as we’ve observed regularly here at diginomica. With Amazon also making its play here, the stakes are high for everyone.

This week Walmart took the next step in its e-commerce evolution by announcing a partnership with online logistics specialist Postmates in order to expand grocery delivery to around 40% of U.S. households, beginning with North Carolina, specifically Charlotte.

It’s a canny move by Walmart which allows it to tap into a proven provider of such services. Postmates claims to operate the largest last mile delivery network in the U.S. with a fleet of more than 160,000 Postmates delivering from 270,000 local businesses in the U.S. and Mexico.

Mark Ibbotson, executive vice president, Central Operations, Walmart U.S., said in the official announcement of the tie-up:

Customers are busy, they are managing jobs, soccer practice, dance lessons and social schedules; so we are on a mission to do more than keep a little extra money in their pockets. With the help of Postmates, we’re making grocery shopping even easier by bringing the everyday low prices of Walmart right to the front door of customers in Charlotte with more areas to be added soon.

In a blog posting on the Postmates website, the firm explains how the relationship will work in practice:

To order Walmart Grocery Delivery, customers place their orders online at Walmart.com/grocery or on the existing Walmart Grocery App. After the order has been picked & packed by Walmart’s personal shoppers, a Postmate will pick up the order from the Walmart store and deliver it to the customer during their specified delivery window. Walmart customers will be able to track the progress of their deliveries in real-time and will be notified when their Postmate arrives. Walmart’s Online Grocery Delivery has a flat $9.95 fee and a $30 minimum order with no price markups. Customers in Charlotte can get their first order delivered for free with promo code FRESHCAR.

Walmart itself is sending its personal shoppers on three-week training programs to learn how to select the freshest produce for online customers.

Groceries can be delivered to customers as soon as the same day. The retailer also offers an Online Grocery Pickup service that allows customers to order their groceries online and pick them up in stores without ever getting out of their cars. This is now available in 1,200 stores around the U.S., with plans to add another 1,000 this year.

Towering

Walmart has also been talking up the expansion of its roll out of Pickup Towers that allow online buyers to pick up their purchases in-store. To date, there are 200 stores with these in action, with plans to add 500 more this year. That will, according to Walmart, also reach 40% of the U.S. population. To date, the firm reckons that around 0.5 million orders have gone through the Towers.

Again it’s a canny move which takes advantage of the network of retail real estate that Walmart has. Amazon does offer a similar service in the shape of its Amazon Lockers, more than 2,000 of which are to be found across 50+ major metropolitan areas in the U.S. But Walmart has the benefit here of its own brand stores and its famous boast that 70% of the population are within 5 miles of an outlet.

But Amazon is pushing on with its own expansion plans following the acquisition of Whole Foods Market and its own, much smaller, network of bricks-and-mortar stores. This week it announced that its own Prime Now grocery delivery service has been rolled out to Los Angeles and Orange County, bringing the total of cities that can access the service to seven. Prime Now was introduced in February and offers Amazon Prime buyers to purchase items from Whole Foods and have them delivered free within two hours.

My take

The U.S. online grocery sector is underdeveloped in comparison to the UK and the rest of Europe, so as noted above there’s a lot at stake here as Amazon makes its move. Walmart’s demonstrated a detailed strategic intent around online in the past and the expectation can only be that this will remain a top priority.

We can also perhaps expect there to be more noise coming from Walmart about the Amazon threat. To date the party line has been that Walmart is quite capable of holding its own and not to enter into discussions about Amazon and its long shadow. But there are avatars for the company who don’t need to be so restrained.

Last month former Walmart USA CEO Bill Simon used an interview with CNBC to call for Amazon to be broken up on the basis that it damages smaller retailers. And as we’ve seen in recent weeks, the idea of giving Amazon a good kicking is something that deeply appeals to the current occupant of the Oval Office…

Image credit - Walmart/Postmates

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