Walmart Expands Grocery Delivery to 100 Cities to Keep Up With Amazon

Demand is still low for these expensive services

Walmart's home delivery system will be a challenge to Amazon Prime.
Walmart

Walmart is expanding its online grocery delivery service from six to more than 100 metro areas, saying it will reach more than 40 percent of U.S. households by the end of the year.

According to the Wall Street Journal, Uber is one of Walmart’s initial grocery delivery partners, which extends a partnership established in 2016, but other delivery companies will also be included. Walmart also works with same-day delivery company Deliv for in-home deliveries, but it was not immediately clear if Walmart will use Deliv for these particular orders.

Walmart membership warehouse club, Sam’s Club, also recently partnered with delivery service Instacart to offer same-day delivery in Austin, Dallas-Fort Worth and St. Louis. Sucharita Kodali, vice president and principal analyst serving ebusiness and channel strategy professionals at research firm Forrester, said this suggests Instacart may ultimately be a last-mile delivery partner for Walmart as well.

Getting grocery delivery from store to door “is a huge challenge for everyone, including Walmart. That’s one of the reasons that Target bought Shipt,” Kodali said. “That said, most customers don’t opt for delivery of groceries to their home. But these retailers are chasing last-mile delivery only because Amazon is challenging them to do so.”

Citing people familiar with the plan, the WSJ said Walmart will also use its Jet.com subsidiary to offer same-day delivery in New York City to better compete with Amazon’s Prime Now, which offers two-hour delivery.

In February, reports surfaced that Amazon was merging Prime Now and its grocery delivery service Amazon Fresh, which Kodali said marks Walmart’s grocery delivery expansion as a direct response to Amazon merging general merchandise available locally with grocery and making these items available for on-demand delivery.

“Walmart had to respond, as Walmart is the largest retailer of general merchandise and the largest grocery, both online and offline, at the moment in the U.S.,” she said.

Walmart did not respond to a request for comment. Uber said it has nothing to announce.

In a blog post, Walmart said it will use more than 800 stores and 18,000 specially trained personal shoppers to fulfill orders, with “thousands more being added this year,” it added in a press release. Training includes a three-week program in which shoppers learn how to select produce and meat.

Consumers order online or via the Walmart Grocery app. Deliveries have a $9.95 fee and require a $30 minimum.

Walmart is touting convenience as well as price, noting in the release, “unlike other services, [consumers] find the same every day low prices on items that they do in stores.”

Walmart is also flaunting its size. In a statement, Tom Ward, vice president of digital operations for Walmart U.S., noted, “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.”

Walmart also offers an online grocery pickup service, which is available in 1,200 stores with 1,000 more to come this year.

Nevertheless, Kodali said consumer demand for online grocery delivery has not changed.

“It’s still too expensive, and no one has figured out how to do it profitably for the price that shoppers want to pay, including Amazon or Walmart,” she said.

And while this won’t make it more inexpensive, Kodali thinks Walmart is on the right track. “They’re offering it as an option for the small percent of people who want to pay for it, they are partnering with third parties, and they are leveraging what they have already built with store-packing functions in their click-and-collect model,” she said.