Wal-Mart wants food shoppers to go online

Success in U.K. spurs push in U.S.

Bentonville is home to a dedicated Wal-Mart grocery pickup location. The company is working on expanding its pickup and delivery grocery services.
Bentonville is home to a dedicated Wal-Mart grocery pickup location. The company is working on expanding its pickup and delivery grocery services.

For more than 15 years, grocery home shopping has been offered in the United Kingdom through Wal-Mart Stores Inc. grocery chain Asda. Today, more than 97 percent of the U.K. has access to online grocery shopping and various pickup and delivery options.

Shopping for groceries from home -- which encompasses both pickup and delivery after placing an order -- continues to grow at a rapid pace in the U.K. Wal-Mart CEO Doug McMillon said the service continues to experience double-digit growth each quarter for Asda, which Wal-Mart acquired in 1999.

With that market seemingly mastered, Wal-Mart has turned its attention to other countries that might be a good fit for online grocery pickup and delivery. International CEO David Cheesewright told investors last week that the retailer is working to leverage its U.K. success elsewhere through the creation of an "International Acceleration Team."

Based in the U.K., the team is working to "speed up the adoption of grocery home shopping processes and technologies."

"We're now working towards a common technology platform to better position us for the expansion of grocery home shopping," Cheesewright said.

Expansion in the U.S. appears to be a priority. Currently the retailer, which gets 56 percent of its annual U.S. revenue from grocery sales, is testing delivery and pickup options in five markets.

Wal-Mart offers home delivery in San Jose, Calif. Denver customers have both pickup and delivery options after ordering online. Huntsville, Ala., and Phoenix are test locations for curbside pickup and Bentonville is home to a dedicated grocery pick-up location.

Asda shoppers in the U.K. have the option of picking up grocery orders after exiting the subway stop. McMillon spoke of that offering during the 2014 shareholders meeting and during a Tuesday call with investors he spoke of taking the successes in the U.K. and "sharing this expertise around the world to test delivery and pickup services in more locations."

As Wal-Mart has introduced new concepts related to online shopping, it has often been criticized for lagging behind its competitors. Wal-Mart's recent launch of a $50 subscription annual delivery service, for example, was immediately compared to Amazon's Prime program. Amazon Prime users pay $99 a year for unlimited shipping and media streaming services.

Amazon announced one-hour grocery delivery in Manhattan on Thursday. It's an expansion of a one-hour delivery service -- Prime Now -- being offered in Atlanta, Austin, Baltimore, Brooklyn, Dallas, Manhattan and Miami. Whole Foods announced last year one-hour delivery in 15 cities, and other traditional grocery chains are looking at click-and-collect options for customers.

For all the innovations and pilots being launched by competitors, experts think Wal-Mart is well-positioned to be a leader.

"I don't think Wal-Mart is behind here," said Brian Yarbrough, retail analyst for Edward Jones. "I do think grocery delivery is for a core set of customers. I don't think the market is as big as it is online for general merchandise, but there's definitely an opportunity there."

A big part of the opportunity is taking lessons learned in the U.K. and figuring out how to apply them here. Experts say that the delivery component of home grocery shopping is more challenging to execute in the U.S. for a number of reasons. Climate and geographic differences present a challenge as does a driver shortage in the shipping industry.

Still, taking lessons learned from U.K. delivery and applying them domestically and in other markets makes sense for Wal-Mart. It also underscores a strength the retailer has compared with its many competitors, said Carol Spieckerman , president of retail strategy firm newmarketbuilders.

"One of Wal-Mart's biggest advantages is its global presence and ability to test and refine concepts around the world then bring them to the U.S.," Spieckerman said. "Wal-Mart is smart to formalize the sharing of best practices among its global units. That said, the competition that Walmart faces in myriad customer convenience models including ship-to-store, home delivery and drive-through pickup will only increase. Wal-Mart can't just think in terms of expanding upon its own success; it must also fend off a growing number of rivals including Google, Peapod, Instacart, Blue Apron and a slew of upstarts that will continue to sprout up as various concepts are perfected."

Wal-Mart executives believe Asda has come close to mastering those concepts. Thanks to Asda's success, countries won't have to invent their own grocery home shopping services, which Cheesewright said will allow for faster and more efficient growth.

"There's a lot of great learning there," Cheesewright said of Asda's success.

SundayMonday Business on 05/24/2015

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