Walmart Inc. plans to make its grocery-delivery service available to about 40 percent of U.S. households by the end of the year, expanding a program that has become part of its strategy to compete for grocery sales with Amazon.com, Target Corp. and others.
The Bentonville company said late Tuesday that the next step for the program will make grocery deliveries available to more than 100 metro areas, covering about 800 stores, by the end of 2018.
Walmart will use its personal shoppers to collect orders in stores and continue to work with ride-hailing services like Uber for deliveries, which will carry a $9.95 fee and require a minimum order of $30. The company said no subscription is required.
Walmart began delivering groceries through a pilot program in Phoenix, Denver and San Jose, Calif., two years ago, then expanded the experiment to include Tampa, Fla., Orlando, Fla., and Dallas last year. The retailer did not specify which markets will offer the service as part of the latest expansion, but Tom Ward, vice president of digital operations, said Walmart will be aggressive with the rollout.
"It's going to happen pretty quickly throughout the year," Ward said, adding that the ultimate plan will be to reach as many households as possible. "We'll leverage our footprint where it makes the most sense to reach as many people with the services as we can."
A recent study conducted by the Food Marketing Institute and Nielsen concluded that 70 percent of consumers will be grocery shopping online in as few as five to seven years. There has been plenty of activity from retailers like Walmart and others in the grocery delivery space to support it.
Amazon, which acquired Whole Foods for $13.7 billion last year, recently introduced two-hour grocery delivery from Whole Foods to its Prime members in four cities -- Austin, Texas; Cincinnati; Dallas; and Virginia Beach, Va. -- with further expansion expected.
Target acquired Shipt, a grocery delivery service, for $550 million late last year and is offering same-day delivery on groceries, essentials and other products in some cities with plans for more.
Even discount chain Aldi is exploring grocery delivery options. The Germany-based grocer announced last summer it is working with Instacart to conduct delivery tests in Dallas, Los Angeles and Atlanta. Aldi has since expanded the program to additional markets.
Carol Spieckerman, a retail consultant and president of Spieckerman Retail, said the grocery delivery expansion should give Walmart an opportunity to "forge relationships with new customers," especially those who value convenience but don't want to navigate the retailer's stores.
"Walmart must expand its delivery capabilities if it is to remain a contender against Amazon and lead the pack against all the rest," Spieckerman said. "Walmart no doubt hopes that baskets well above $30 will dominate but either way, quick expansion will bring new insights into the economics."
Groceries are key to Walmart's success with about 56 percent of its U.S. revenue coming from grocery sales. Walmart has focused on improving the freshness and quality of its assortment the past several years, while aggressively lowering prices on items and rolling out convenience-based services like its online grocery pickup for customers.
The company has its pickup program available at 1,200 locations across the U.S. and plans to extend it to about 2,200 by the end of the year, according to Ward. He also said Tuesday that the company currently employs more than 18,000 personal shoppers with additional hires planned as both grocery pickup and delivery services are rolled out to a larger audience this year.
Uber will continue to be one of the delivery providers, but Ward indicated Walmart will work with other companies as well. He did not specify which companies will be involved in the expansion and said Walmart will "continue to understand how that is going to look over the next 12 months."
Grocery pickup and delivery services are a big part of Walmart's plan to grow its e-commerce business as well after U.S. online sales decelerated to 23 percent in the fourth quarter. Despite the slowed growth, executives have reiterated their forecast for 40 percent growth during the fiscal year.
"We're going to continue to look for ways to utilize our stores and our e-commerce teams together and our businesses together because we believe long-term that's where we win as a company, is getting those two things in sync," Chief Financial Officer Brett Biggs told investors during a presentation at the Raymond James Institutional Investors conference last week.
Business on 03/14/2018