Wal-Mart Testing Same-Day Home Delivery

It’s a test, and only a test, but Wal-Mart is trying out a same-day delivery service called Walmart To Go in northern Virginia, Philadelphia and Minneapolis and will expand to San Francisco and San Jose by this time next month. In effect, it’s lobbing one of Amazon’s grenades –- its own test of same-day delivery some markets -- back into its trench and following up with an artillery shell. If it works.

“If you don’t care about losing a lot of money, sure, you can pull this off,” Forrester Research analyst Sucharita Mulpuru tells the New York Times’ Stephanie Clifford. “The question is: Can you pull this off profitably? I’m not convinced.”

Citing similar attempts by retailers such as Barnes & Noble and concluding that “the service had not been a game-changer,” Malpuru suggests that carless city dwellers might be attracted to the convenience of same-day home delivery but folks in the ’burbs are more likely to just hop in their cars and get it themselves.

UPS drivers will deliver an unlimited amount of 5,000 general merchandise items –- from TVs to toys to booze (but not tomatoes) -– for a $10 fee within a four-hour window of the customer’s choosing if the order is placed by noon, Tiffany Hsu reports in the Los Angeles Times. Although the new program does not include grocery items, Wal-Mart has been developing a same-day grocery delivery service in some California markets where shoppers who spend at least $45 can get same-day delivery for an additional $5 to $10 fee.

Why did Wal-Mart pick the markets it did to test the concept?

“We had to make sure that we picked markets where we had a large presence of stores,” spokesman Ravi Jariwala tells the Washington Post’s Abha Bhattarai. “I don’t know that there was any other reason -- it’s not that we liked the motto ‘Virginia Is for Lovers,’ or anything like that.” (It’s a good thing this is not a political campaign. There’s no telling what the opposition would do with a line like that.)

Wal-Mart does have a distinct advantage over Amazon if the model proves feasible for national rollout. 

“It could essentially transform the more than 4,000 Walmarts, along with Sam’s Club and other divisions, into distribution centers,” Clifford points out. “Amazon, by contrast, had fewer than 40 distribution centers in the United States at the end of last year and has plans to add about 20 worldwide this year.”

But shipping from stores rather than from warehouses is more costly, analysts tell the Wall Street Journal’s Shelly Banjo. 

"It can be three to four times the cost for the retailer to pick items and pack them from a store versus having a really efficient, automated process back in a distribution center," according to Kurt Salmon retail strategist Al Sambar.

Banjo reports that Wal-Mart “has quietly begun matching [Amazon's] prices when customers ask and cites a blogger who says he got the price of a computer printer reduced just by showing the online retailer’s lower price to a customer service rep. That’s a response, presumably, to the Amazon Price Check app we wrote about last month in “Wal-Mart Boots Out Amazon's Kindles.”

Officially, however, the Walmart To Go service only guarantees the same prices shoppers would get if they were to shop in the store that packs and delivers them and explicitly “does not match prices from other online or physical stores.” 

Some analysts see the Wal-Mart move as potentially lucrative. Brian Sozzi, NBG Productions chief equities analyst, tells the AP’s Anne D'Innocenzio that if Wal-Mart expands the service across the country while continuing to open smaller stores, "that is a powerful model not only in the fight against Amazon, but also dollar stores."

I typed “walmart” into the Amazon.com search engine this morning and the results were intriguing. At the top was the book The Wal-Mart Effect: How the World's Most Powerful Company Really Works -- and How It's Transforming the American Economy. Next: Amazon.com Gift Cards by Amazon, $10.00 - $100.00. So then I typed Amazon in the walmart.com search box. The top result? A Visa $25 Gift Card, followed by a Pandigital Tablet PC, and then some cases for the Kindle Touch.

There are certainly some loopy algorithms at work as the two retailing forces escalate their attacks on each other’s once-hallowed ground.

2 comments about "Wal-Mart Testing Same-Day Home Delivery".
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  1. Adam Hartung from spark partners, October 10, 2012 at 11:52 a.m.

    The Kurt Salmon analyst has it right. Retail stores are designed for merchandising and self-service, not for pick/pack/ship. Combine that with Wal-Mart's penchant for low prices and home delivery is really a non-starter. Lots of talk right now, but this will go nowhere.

  2. Gary Chatman from estorerunner,Inc, October 10, 2012 at 12:19 p.m.

    Much to early in the "last mile" space to write this off yet.

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