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Walmart penetrates online grocery delivery to 100 more cities

With the aim of dominating the online grocery delivery segment, the US E-Commerce major, Walmart is all set to expand service in excess of 100 metropolitan areas in the country by the end of 2018, NYT reported.Rat RaceTraversing the terrain of quick and competitive online grocery service is riddled with several roadblocks such as refrigeration challenges, storage woes and high transportation costs and more. Invariably, the key players in this segment firmly believe that this segment of the business is not only worth pursuing in a humongous way but also to a great extent, unexplored terrain. Rightly so, a bevy of firms has plunged into this segment to gain the foothold and enjoy the fruit of first movers.Citing Walmart, the report said that orders will be fulfilled in excess of 800 outlets across the US and shuttled to shoppers by drivers contracted through Uber, Deliv and other ride and delivery platforms. All the shoppers have to is just to place a minimum order of $30 worth of goods and pay an additional delivery fee of $9.95. They are guaranteed to get their products within four hours if they place the order by 1.00 PM.Walmart Versus AmazonThe plan puts Walmart, world’s largest retailer on a direct collision course with the world’s most powerful e-commerce player, Amazon, which purchased the Whole Foods grocery chain for $13.4 billion last summer and recently announced plans to use those stores to fill on-demand orders. Other retailers like Costco, Target, and Kroger are also joining the increasingly expensive battle for customers who want eggs and milk without leaving their couch, the report concurred.“There is a lot of experimenting going on as everyone tries to figure out that last-mile delivery — it’s a tough economic equation to make work,” said Mike Knemeyer, a professor of logistics at Ohio State University. “But if you can, you’ll have a big head start on the others, and you’ll end up making money not just in groceries but on all of the things that you sell.”NexusThe nexus of e-commerce and grocery sales is increasingly appealing to retailers. “The thing that’s great about grocery is that it’s a pure traffic driver — no matter who you are, you need to get groceries every two weeks, which makes it an exception from all the other categories that keep retailers up at night,” said Matt Sargent, a retail expert at the consulting firm Magid.

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Humongous MarketBut while the total grocery market is humongous — estimated to be around $1 trillion annually in the US — many customers still insist on seeing and touching their food in person before buying.At present, the annual spending on online groceries is only $27 billion, or 3% of the total, citing the study by Forrester Research, which specializes in technology, the report said.Balancing the costs is another key hurdle. Grocery providers have to cope up with the expense of packaging delicate produce and meats in ice packs and dispatching fleets of company-owned vehicles from distribution centers staffed around the clock, the report pointed out.Amazon’s Share of StruggleThe unveiled AmazonFresh service in the Seattle area in 2007 and tested it for years before expanding it in excess of twenty cities. Its patrons pay $14.99 a month — besides their $99-a-year Prime membership — to have groceries sent directly to them. Apparently, towards the end of last year, Amazon firmed up its mind to withdraw AmazonFresh from few cities.Sucharita Kodali, Analyst at Forrester said, “There’s no question that online grocery has been a challenge for everyone, including Amazon. The reason is it’s just extremely cumbersome to get the last mile going.” Nevertheless, Amazon kick-started a slew of activity after it acquired Whole Foods in June 2017.Same-Day ProgramIn October last year, Costco introduced a two-day delivery option for dry groceries and a same-day program for fresh goods through Instacart, a delivery service. Target said in December that it would purchase the online same-day delivery service Ship for $550 million in cash. Amazon, which has several brick-and-mortar grocery options in Seattle, said that it had commenced offering same-day delivery of groceries from Whole Foods in six cities. Furthermore, the company has plans to widen its footprint to the rest of the US in this year. The program is run through Amazon’s Prime Now service, which relies on contractors to make deliveries in their personal cars within two hours of an order being placed. The service is free to Prime customers, but Amazon automatically adds an optional tip, the report added.Kroger took the cue from Amazon and said it would widen its footprint across the country for home delivery of groceries through Instacart. Walmart’s Sam’s Club division, which said in March the firm would offer members free shipping on online orders for an annual $100 fee, also uses Instacart. But Walmart said that it would not tap Instacart for the grocery delivery program at its Walmart stores, which it said would reach more than 40 percent of American households.Greg Foran, CE, Walmart said, “We are saving customers time by harnessing innovative technology, and connecting all the parts of our business into a single seamless shopping experience: great stores, easy pickup, fast delivery, and apps and websites that are simple to use,”Walmart has made substantial investments in its growing suite of online offerings, including an alliance with Google to sell Walmart products on Google Express and the creation of Store No. 8, an internal venture to help develop new online businesses, the report said.In the fall, Walmart bought Parcel, a 24-hour delivery service that uses algorithms and leased vehicles to send perishable and non-perishable products to customers in New York City.Walmart also reiterated that it planned to expand its curbside grocery pickup service to 1,000 more locations this year, in addition to the 1,200 locations where it is already offered. The service allows customers to order food online and collect it at Walmart stores. But Walmart’s e-commerce success has sometimes been fickle — its online sales rose 23% in its most recent quarter, less than half the rate of growth in each of the previous three quarters and a performance that sent a ripple of nervousness through the stock market, the report said.Walmart’s expanded delivery service requires that customers visit the company’s website or grocery app to place orders. The chain will then have one of its 18,000 personal shoppers collect the selected items in stores. Each of those employees — along with the thousands more that Walmart said it would add this year — undergoes a three-week training program that teaches them how to pick the best meats and produce. As specialists, they are paid more than the company’s entry-level workers, it continued.Informed GambleKnemeyer termed the beefing up of its grocery delivery service was an ‘informed gamble’ for Walmart — one that will most likely serve upside benefits such as data collection and inroads with young, affluent city residents. The chain, long known as a discount retailer, has lately been trying to broaden its appeal. Towards this end, the company invested $3.3 billion and acquired Jet.com, a bulk online retailer, thus giving Walmart access to ‘urban and millennial customers.’Last year, Walmart acquired the prestigious e-commerce brands Bonobos and ModCloth. In March the firm unveiled “Instagram-worthy” collection of mattresses and bedding, through a new exclusive website.But the supercenters for which Walmart is best known tend to exist on the outskirts of cities and in rural areas. Breaking into metropolitan grocery ecosystems, which often support an already robust network of delivery services for grocery chains and restaurants alike, could be a tough ask, experts were quoted as saying by the report.And the feature of groceries that make them so attractive to retailers — they are regularly consumed and so must be regularly replenished — make most consumers unwilling to splurge on them. Walmart’s $9.95 fee on each order is a much more visible cost to consumers compared to Amazon’s annual $99 fee for its Prime membership, which many shoppers set to auto-pay and then forget.Matthias Winkenbach, director of M.I.T.’s Megacity Logistics Lab said, “They probably just look at the relatively high delivery fee and get scared off. Walmart would have to do a very good job communicating the overall economics of shopping their every day low prices versus Amazon.”