Does Walmart's New Grocery Delivery Program Raise the Stakes?
Mega-retailer Walmart Inc. (NYSE: WMT) announced Wednesday that it will begin this fall offering same-day grocery delivery service at 1,400 stores in all 200 U.S. metropolitan areas where its Grocery Delivery service is currently available. The company said that the new service, called Delivery Unlimited, would be available in 1,600 stores and more than half the country by the end of this year. Walmart has about 4,200 U.S. stores.
The company began testing the service in four cities earlier this year and is apparently satisfied that it is something that enough customers will pay for to make it worthwhile for the company to offer. Delivery Unlimited is a subscription program that will cost $98 a year or $12.95 a month.
In January, Walmart beefed up its delivery offerings by adding four delivery companies to expand its online grocery program. The company said it employs more than 45,000 people as personal shoppers who have been trained on how to “select the freshest produce and the best cuts of meat” for online grocery customers.
Walmart also said that, “unlike other services,” Grocery Delivery (and, by extension, Delivery Unlimited customers) pay the “same every day low prices on items that they do in stores, no premium, no hidden cost.” An independent review of grocery delivery services by Consumer Reports found that some stores may charge more for delivered items. Costco Wholesale Corp.’s (NASDAQ: COST) prices for delivered groceries averaged 31% more than prices in the company’s brick-and-mortar stores.
Later this year, Walmart is scheduled to begin testing an in-home grocery delivery service to compete with Amazon.com Inc.’s (NASDAQ: AMZN) Amazon Key program, using a smart device that allows delivery drivers to enter customers’ homes while they’re away and leave the delivered goods inside the house. Walmart’s service is planned to go one better than Amazon Key: the drivers will put perishable items in customers’ refrigerators.
Target Corp. (NYSE: TGT) acquired delivery service Shipt in December 2017 to jump-start its same-day delivery service. Target announced earlier this year that it is rolling out a same-day delivery service at 1,500 stores in 47 states for some 65,000 items available at the store’s website. Target’s annual subscription price is $99, or customers can choose to pay $9.99 per delivery.
Kroger Co. (NYSE: KR) last year launched its own same-day delivery service in a limited trial. At the end of the company’s first fiscal quarter in May of this year, Kroger delivery locations had been expanded to 2,126 of the company’s 2,761 retail grocery stores.
Same-day delivery is all about customer loyalty. Grocery stores operate on pretty thin margins and they need to keep their revenues up in order to grow. Does Walmart’s program raise the price of poker? Not really, but it keeps the company even with other companies’ delivery options and Walmart’s scale may prove to be an advantage in the future. The good news for consumers is that all these retailers will continue to look for an edge as they seek to hold onto current customers and snatch some away from their competitors.