Wal-Mart Stores Inc. has acquired Brooklyn, N.Y.-based delivery service Parcel Inc., taking another step in efforts to develop quicker ways to deliver packages and groceries to customers.
The Bentonville retailer said Tuesday that it completed the acquisition of the logistics startup late last week and plans to use Parcel to offer same-day deliveries from Wal-Mart and Jet.com to customers in New York City. Wal-Mart selected Parcel to help navigate last-mile deliveries in New York City because the company has become a "proven leader in e-commerce package delivery," according to Nate Faust, Wal-Mart's senior vice president for its U.S. e-commerce supply chain.
"Parcel has developed unique expertise delivering to customers in a distinctly challenging and essential market," Faust said in a prepared statement. "This acquisition allows us to continue testing ways to offer fast delivery while lowering our operating costs."
Wal-Mart did not disclose the price it paid for Parcel, but said it was "smaller than previous acquisitions" made this year. The company has purchased online retailers Shoes.com ($70 million), Moosejaw ($51 million), ModCloth (undisclosed) and Bonobos ($310 million) since Marc Lore became Wal-Mart's U.S. e-commerce chief. Lore moved into his current role after Wal-Mart completed the $3.3 billion acquisition of online retailer Jet.com in Sept. 2016.
Parcel's partnerships with meal-kit, grocery and e-commerce companies will continue, according to Wal-Mart. But the retailer sees even more upside for its own same-day deliveries for Wal-Mart and Jet.com. Jet.com is currently testing free same-day delivery of certain orders in New York City and acquiring Parcel -- which schedules two-hour delivery windows and uses a fleet of leased trucks to drop off packages -- will enable Wal-Mart to build on it.
"New York City is the top market for both Jet and Walmart.com, and because of the density of the area -- along with the proximity of our fulfillment centers -- it's the perfect place for high-impact innovation," Faust said in the prepared statement.
Wal-Mart is testing a number of delivery solutions as it tries to provide convenient options for customers as it competes with retailers such as Amazon.com and Target Corp.
The company is partnering with Uber on a grocery delivery test, dropping off online orders from stores in a handful of markets such as Phoenix, Orlando, Fla., Tampa, Fla., and Dallas. Wal-Mart also is using its own trucks to deliver groceries to customers in Denver and San Jose, Calif.
In addition, Wal-Mart is using store employees to deliver packages to customers on their way home from work shifts. Two stores in New Jersey and one in Arkansas are participating in the test.
Last month, Wal-Mart unveiled a partnership with August Home and Deliv on a Silicon Valley test that promises store-to-refrigerator delivery. Through August Home's smart locks, delivery workers will be able to enter customers' homes to drop off packages and put groceries away.
John Kent, director of the supply chain management research center at the University of Arkansas, Fayetteville, said the Parcel acquisition is another step in Wal-Mart's mission to develop delivery service solutions for customers. He said offering same-day delivery in a dense market like New York City also presents a unique opportunity for the retailer as its e-commerce business grows.
"It's a difficult market for them to apply their traditional brick-and-mortar techniques to," Kent said. "However, it's a huge market. So they see it as a big potential and they see the e-commerce piece and felt like they had to solve this problem. So they went out and did their due diligence."
The move comes about six weeks after Target made a similar acquisition, buying San Francisco-based startup Grand Junction. The technology company helps retailers make deliveries faster and more efficiently. Target said at the time it would use the acquisition to expand a same-day delivery pilot program in New York City this fall and offer it in other major cities next year.
Brian Yarbrough, a retail analyst for Edward Jones, said profitability remains a concern as Wal-Mart continues to pour money into its e-commerce business. But the acquisition of Parcel is a sign the retailer is determined to remain at the "forefront of everything" as consumer expectations evolve.
"I think Wal-Mart is saying, 'People are starting to do this. We probably need to get out in front of this instead of waiting around four or five years and seeing if this becomes successful,'" Yarbrough said. "It's pretty small. So if it doesn't work it's only in one market and won't be a disaster."
But success could give Wal-Mart the confidence to introduce similar same-day delivery service to other large cities, according to Kent.
"I would say they have visions of taking this learning, this creativity, the innovation they come up with in New York City and apply that into other major metropolitan areas," Kent said.
Business on 10/04/2017