Retailers Walmart, Amazon Rolling Out Same-Day Deliveries

by Mark Friedman  on Monday, May. 19, 2014 12:00 am  

Wal-Mart started testing same-day delivery program for online customers in 2011, and now it’s offered in three cities.

“I think same-day delivery is a very niche market,” said Paula Rosenblum, managing partner of Retail Systems Research, a retail research and advisory firm based in Miami.

About 8 percent of all retail sales in the U.S. currently come from online, she said, and she doubted that many of those customers expect to have their merchandise within hours of clicking the “buy” button.

Still, while there might not be a huge demand for same-day delivery of nongrocery items, there might be a market for same-day delivery of foodstuff, Rosenblum said.

“The problem is: How do you make money at it?” she said. The average profit margin for grocery items is already only about 1 percent.

“And I don’t think it’s any easier to make money at [delivering groceries] now than it was 15 years ago,” Rosenblum said.

It’s unclear what the same-day delivery service will do for revenue. But Wal-Mart could use any increase in same-store sales, which have been slipping. In February the retailer reported its fourth consecutive quarter of declining sales at stores that have been open at least a year, a key indicator of a retailer’s health. For its fiscal year that ended Jan. 31, Wal-Mart reported revenue of $476.3 billion and net income of $16.022 billion. The previous year, Wal-Mart had sales of $468.7 billion and net income of $17 billion. Amazon, meanwhile, reported revenue of $75.5 billion and net income of $274 million for 2013. Amazon’s 2012 revenue was $61.1 billion and it lost $39 million.

Online sales are projected to grow. Forrester Research, a global research and advisory firm based in Cambridge, Massachusetts, said in a report released last week that online retail sales in the United States were expected to reach $294 billion this year, or about 9 percent of all sales in the country. And by 2018, sales are projected to reach $414 billion, or 11 percent of total U.S. sales.

Wal-Mart Delivery

In 2011, Wal-Mart began testing its online grocery delivery service in San Jose and San Francisco. Spokesman Jariwala said the program has been a success, but declined to say how much revenue the service has generated.

Wal-Mart now has about 10 specially built delivery trucks for the Bay Area. The vehicles have three compartments: one for frozen items, one for refrigerated items and one at room temperature.

“We have increased the number of trucks over the last year, because the … demand for the service continues to increase,” Jariwala said.

He said people are using the delivery service for their weekly grocery trips, but they’re also using it for a handful of items.

 

 

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