Shortly after Walmart opened its first Supercenters with food markets in 1988, top executives began to see groceries as the retail titan’s future bread and butter.
Now Walmart is America’s biggest grocery seller, and food is becoming ammunition in the Bentonville company’s online duel with Amazon.
“We’re coming from a position of strength because we have a giant network of stores [5,355 U.S. retail locations],” Walmart spokesperson Molly Blakeman told Arkansas Business. “We’ve really built a strong grocery pickup business, and delivery is an extension of that.”
Walmart started grocery delivery almost a year ago to capitalize on a popular grocery pickup service it initiated in 2013. Retail analysts see delivery as the logical extension of a Walmart strength: click-and-collect, melding online shopping with pickup at brick-and-mortar stores.
Groceries made up 56 percent of Walmart’s $331.7 billion in U.S. sales last fiscal year, and food is a crucial draw to get customers in the door.
The new delivery option is available in northwest and central Arkansas, and in West Memphis. Deliveries started in September in Little Rock, North Little Rock, Sherwood and Bryant, tying in with the pickup service, which is offered at 59 stores across the state.
Walmart is adding to its army of 30,000 personal shoppers nationwide, teams that have been filling orders for pickup for six years. They’ll do the same for delivery orders, then hand the bags over to third-party delivery companies like DoorDash and Postmates. Delivery will cost either $7.95 per order or $9.95, depending on the time.
“We’re able to utilize the processes that power our grocery pickup service to power our grocery delivery service,” said Blakeman, who works in Bentonville. “It’s a very strong business model that we’re able to leverage in two ways for our customers. It’s important to note that pickup is free.”
Delivery and pickup payments are made online; no money changes hands at the doorstep or on the parking lot.
“I don’t have numbers on customers choosing delivery vs. pickup, but delivery is the newer service, so it’s not as well established,” Blakeman said.
Amazon and Whole Foods
Meanwhile, Amazon launched grocery delivery from its Whole Foods Market on Bowman Road in Little Rock last month. Customers with a yearly Amazon Prime subscription get free delivery within two hours, according to company officials.
“With our goal to cover as many Prime customers as possible with this new service in Little Rock, our coverage is expansive,” said Tanvi Patel, head of business development for Prime Now. “We’re excited to reach customers from Maumelle and Sherwood in the north to Brooks and Sardis in the south and from American Manor in the east to Avilla in the west.”
The Little Rock venture was part of a nine-city delivery extension for Whole Foods, which Amazon bought for $13.4 billion in 2017. Deliveries are now made in 75 metro areas nationwide, and grocery pickup services are available from Whole Foods in 30 metro regions, “with plans for continued expansion this year,” according to a company statement.
Prime members place orders through the Prime Now app and choose the pickup option, and orders of $35 or more can be picked up an hour later at no additional charge. For a $4.99 fee, shoppers can get their orders in a half-hour.
“Customers have told us that having options for grocery delivery is important, so we’ll continue to invest in that space,” an Amazon spokesperson told Arkansas Business, but the company did not reveal the value of that investment.
“Today, customers have a variety of options for grocery delivery with Amazon, including free delivery from Whole Foods Market on Prime Now in nearly 90 metros, AmazonFresh in 15 major metros, and Prime Pantry in select regions,” the spokesman said.
Items are plucked by workers — not necessarily Whole Foods employees — and driven to customers by contracted drivers for Amazon Flex, the company’s package delivery service. Drivers use their own vehicles, punching addresses into a routing app.
Kroger Starts In-House Delivery
The Kroger Co., which has about three dozen supermarkets in Arkansas, has unveiled Kroger Ship, its own online grocery delivery service, rolling it out in Cincinnati, Houston, Louisville and Nashville, Tennessee. In other areas, including Arkansas, Kroger continues to offer delivery through third-party services like Instacart.
Grocery delivery — at least in the form of milk, butter and eggs — was once an American staple, before home refrigerators changed habits in the 1940s, ’50s and ’60s. And delivery was slow to make a comeback in the cellphone age. While restaurant deliveries have boomed for years, grocery deliveries remain rare in Arkansas. Online purchases make up nearly a quarter of apparel sales and 30% of computer and electronics sales in the U.S., according to a report by Deutsche Bank Securities cited recently by Alana Semuels in The Atlantic. By contrast, online sales comprise only 3% of the U.S. grocery market.
Part of the reason, beyond customers’ insistence on picking out their own cucumbers, is that grocery delivery is far more complicated than shipping Instant Pots and T-shirts. A common grocery order might include ice cream, heavy bottled drinks, tomatoes and corn chips. The ice cream has to be kept cold, the chips uncrushed, the tomatoes selected carefully.
Still, Walmart thinks online grocery shopping’s time has come.
Blakeman said serving busy customers is the company’s foremost priority. Ninety percent of Americans, she noted, live within 10 miles of one of Walmart’s 5,355 domestic locations. “The grocery pickup and delivery piece of the equation is about serving customers where they are,” she said.
“We’re really excited about what we’re hearing. Customers are looking to Walmart not only to save them money, which we’ve been doing with our low prices for many years, but also to save them time. The ability to order groceries online and either pick them up or have them delivered right to your front door is a way for customers to make a chore that can take a couple of hours into something that can be completed in a few minutes.”
Army of Personal Shoppers
Blakeman described Walmart’s process: Customers go to Walmart’s grocery website or app to see if delivery is available to their address; the minimum order is $30. Then they search for items and click the ones they want. The personal shoppers, who fill the baskets and hand them off to the third-party drivers, are a Walmart selling point.
“Our employees have to complete a three-week training program to become Walmart personal shoppers,” Blakeman said. “They know how to pick the freshest fruits and vegetables and the best cuts of meat for each customer. That’s hugely important to us. The process is simple for shoppers, who can save their favorite items for ease with next week’s order, and the more they do it, the better we make it. If you buy milk, bread and eggs each week, they will be there on your list to click time after time.”
The customer chooses a delivery time and agrees to be home, and the service fee is added to the bill paid online. Online prices are the same as in-store prices, Walmart promises. The company couldn’t estimate how many drivers its third-party delivery partners will employ to deliver Walmart orders.
Blakeman sidestepped a question about how grocery delivery fits into the company’s overall strategy against Amazon, the major challenger to Walmart, the world’s largest company.
With a string of acquisitions and vigorous tech investments over the past few years, Walmart has gained its competitive footing online. “We know that customers are more and more shopping online, and they appreciate options that save time whether at the store or online,” Blakeman said. “We’re working to give them options for the most convenient method for them. It’s never going to be binary.”
Target’s ‘Drive Up’ Service
Walmart wouldn’t reveal its sales numbers on delivery and pickup orders, but a Cowan & Co. report cited by Bloomberg’s Sarah Halzack estimated recently that grocery pickup sales at all retailers will total $35 billion in the U.S. by 2020. As Halzack wrote, “this is a model that’s well-suited for traditional retailers. They are in a good position to scale up quickly, and they are doing just that.”
Target initiated a grocery pickup service called Drive Up just last week, and representatives at its three locations in Little Rock and North Little Rock reported Tuesday that the operation was up and running. The company said the service will be available at all its 1,851 U.S. stores by the end of the year.
The report by Cowan & Co. found that Walmart’s click-and-collect efforts are contributing to Walmart’s sales growth, with grocery pickup accounting for 0.9 to 1.3 percentage points of an estimated 2.8 percent increase in net domestic sales.
“We’re aggressively expanding both pickup and delivery options this year, adding more than 1,000 stores to our pickup fleet and doubling the number of stores from which we make deliveries,” Blakeman said. “Our assortment continues to grow, with more than 100,000 items available to customers. With in-store service, pickup and now grocery delivery, Walmart has a shopping experience for every occasion.”