Walmart is aggressively moving into the grocery delivery space, defending and expanding its turf against traditional supermarket leaders like Kroger and Amazon, made even more of a force to be contended with by its acquisition of Whole Foods Market to power AmazonFresh.
Amazon reached 18% market share in U.S. online grocery sales in 2017, double that of Walmart. AmazonFresh, appealing specifically to young professionals, more than doubled its monthly sales last year, from $3 million in January to over $7 million by December, for an estimated $350 million in total year sales.
Amazon’s online grocery sales grow more than 50% in each of its top 3 world markets – https://t.co/P0OXUKwEHG Inc.’s online grocery sales grew 59% in the United States last year and are expanding nearly as fast in the United Kingdom and Germany, accor… https://t.co/b7qZd2DREt
— Internet Retailer (@IR_Magazine) January 18, 2018
As RetailDive notes, “’Organic’ proved to be a key search term, with roughly 25% of all AmazonFresh sales going to items with that word in the title, including eight of the top 20 bestselling items.”
You can bet the folks in Bentonville, Ark., aren’t planning to sit back and let Amazon’s online grocery business leave them in the dust. Walmart has had to move aggressively to stay competitive in the rapidly evolving world of groceries and e-commerce and delivery services.
It has already rebooted its Walmart to Go service as Walmart Grocery, and it’s expanding local tests of how to get groceries to customers when, where and how they want they delivered, as highlighted in its most recent Investors Day. As CEO Doug McMillon stated at that event,
We’ve been aggressive with Online Grocery expansion in the U.S., building on our international experience. We’ve been experimenting with delivery in the U.S. We created a digital payment platform in the form of Walmart Pay. And we’re trying things like automated towers to speed the in-store pickup experience. We’re digitizing the checkout experience with Scan & Go. We’re making acquisitions to improve our online assortment.
We’re digitizing experiences in-store, including our pharmacy area. We’re learning how to reward customers for behavior that helps us lower costs and save them money. Picking things up at store level for a discount is one example. We’re expanding our delivery capabilities in China and other markets. We’re enabling easy reorder online, and we’re learning to partner with others in new ways. We’ve always enjoyed creating lasting win-win relationships, and that hasn’t changed.
The common thread in this innovation story is around the customer experience, especially convenience. We’ve made progress on value. Our prices are lower. On assortment, we have even more choice. And we’re focused on saving customers’ time and making it easier to shop with us.
As an example of partnerships and being open to trying new services, Walmart Canada is expanding its click-and-pick-up Penguin Pick-Up/Walmart hubs in Toronto to seven locations to enable residents to place their grocery order online and select a convenient time and location for free pickup.
“The new co-branded Penguin Pick-Up/Walmart locations allow us to better serve more Toronto households, especially those that don’t have a Walmart Supercentre nearby,” stated Daryl Porter, VP omnichannel operations and online grocery at Walmart Canada. “We continue to invest in services to make every day easier for busy Canadians and that includes offering greater flexibility and convenience to shop for groceries.”
“The convenience of shopping for groceries online and being able to pick them up at a Penguin Pick-Up location at the time of your choice makes a lot of sense for people who live or work in dense urban neighbourhoods,” added Mitchell Goldhar, owner of Penguin Pick-Up and Chairman of SmartCentres. “Since its launch in 2014, Penguin Pick-Up has received packages from over 5,000 retailers in 11 countries and the number keeps growing.”
Walmart Canada operates 410 stores nationwide serving more than 1.2 million customers daily. Walmart Canada’s flagship online is visited by 600,000 customers daily.
Exploring how content can drive online grocery sales, Walmart recently partnered with BuzzFeed’s social food network Tasty, encouraging customers to buy Walmart.com and Jet.com products directly from recipes in Tasty’s app.
“The growth potential for online sales of groceries in 2018, and fresh foods in particular, is huge,” writes One Click Retail analyst Nathan Rigby. “In all likelihood, this is the tipping point we have been waiting for.”
Walmart’s Store No. 8 R&D team is tasked with developing customer-first innovations around delivery, payment and the mobile shopping experience. As noted in a recent blog post,
“We now live in a time when we can simply tap our fingers on a smartphone screen to order almost anything and have it delivered, for free, in two days or less. And not too far off is the ability to experience shopping in a virtual setting without leaving the comfort of our homes,” Katie Finnegan, Jet’s former corporate development head who serves as Walmart’s VP of incubation at Store No. 8, wrote in a recent blog post.
“Building new horizons in the context of a company like Walmart is pretty amazing, because new technologies and business models can impact so much—from everyday things like making grocery shopping a little more convenient, to the extraordinary: changing key ways the retail world works.”
.@StoreNO8 is @WalMart's idea incubator. Founder @KatieFinnegan, explains how they play a role in innovating the customer experience. #CheddarLIVE pic.twitter.com/pGcHl1lzDo
— Cheddar (@cheddar) January 17, 2018
Analysts are watching developments like Walmart’s recent trademark for the name “Wam! By Walmart,” described in its U.S. Patent and Trademark Office filing as “retail and online grocery store services featuring home delivery service.”
Walmart has also filed a patent application for a system that would allow customers to view individual fresh items remotely before purchasing them. As Supermarket News notes,
The “Fresh Online Experience,” or FOE, would allow customers to order produce, meat and bakery items online using stock photos, but then have the opportunity to approve the actual items being purchased via image scans (either two- or three-dimensional) sent to them by Walmart store workers. Once an item is approved by the customer, an “edible watermark” could be applied to the item before it was packaged for pickup or delivery to verify that it was the item the shopper had selected.
Walmart also offers in-store pickup for online grocery orders and is trialing “in-fridge delivery,” giving access to delivery drivers to place groceries inside customers’ refrigerators at home. Another pilot grocery delivery tests invites shoppers to order at Walmart.com and have personal shoppers pick items in-store then use Uber for delivery.
Among the strongest performers in the Dow over the past year, ending 2017 with its best gains since the turn of the century, Walmart’s acquisition of Jet.com helped bolster its e-commerce sales by 50%—and you can’t put a price on the technology and market intelligence that Walmart is gaining from acquring the urban-focused Jet. (See more in our recent Q&A with Jet VP of Marketing David Echegoyen.)
“It’s actually signaling their shift from brick-and-mortar stores to a stronger e-commerce presence. We feel they’re well-positioned to compete with Amazon,” said Mark Tepper, president Strategic Wealth Partners, about the signal of the imminent corporate rebrand to Walmart from Wal-Mart Stores on Feb. 1st that a cohesive, seamless, omnichannel Walmart is a focus in 2018.
Walmart’s focus with the acquisition of Jet.com is on urban shoppers in cities like New York, Chicago and Boston, while the 55-year-old discount brand’s online store serves the rest of the country. The retail giant is segmenting America with Jet.com for urban millennials and Walmart for the rest.
Walmart customers at its 4,700 stores and on Walmart.com get different deals from Jet.com’s urban customers. Jet.com, meanwhile, parted ways with Costco after its sale to Walmart.
Turns out old dogs can learn new tricks—and that Amazon doesn’t have a monopoly on digital innovation.
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