It’s been a busy week for retailers looking to crack their “last mile” problem — the steps that put goods ordered online in shoppers’ hands without devouring profits. Wal-Mart Corp. is about to announce to shareholders that it will test grocery delivery using Uber and Lyft. Target, which is still experimenting with Instacart for grocery deliveries, says it is ditching its extensive pilot with Curbside. And Kroger says it’s expanding ClickList, adding stores in Houston to its burgeoning experiment.
“It’s messy,” says Paul Weitzel, VP, Willard Bishop, a retailing consultancy that has studied online grocery shopping extensively. “But it’s inevitable. The first movers are winning, and there’s an advantage to being one of the first to successfully get e-commerce orders into shoppers' hands. Stores that do it well are reporting incremental gains of up to 30% when shoppers use them for both physical and online shopping. But it’s still not profitable.”
In Walmart’s new test, customers order groceries online, and Walmart associates compile their order, then request a driver from either Uber or Lyft, all for the normal $7-10 delivery charge online. (Walmart, not the customer, pays the driver.) It says it will pilot the idea in Denver and one other market. It’s been testing Deliv, another service, for online orders for Sam’s Club since March.
For Kroger, the expansion of ClickList, a service exclusive to the Cincinnati-based chain, means people can shop online and pick the order up curbside at 22 locations in Houston. To get consumers to try it, it is waiving the $4.95 fee for the first three orders. Kroger has been testing online shopping since November, 2014, In its announcement, it says this rollout comes from “overwhelmingly positive” feedback. “We are certain this online shopping service will offer young families, seniors, disabled customers and other shoppers an easier and more convenient way to grocery shop.”
But test results for Target’s Curbside program must not have been so rosy. While a spokesman tells Marketing Daily that the Minneapolis-based retailer is continuing its grocery-delivery tests with Instacart in Chicago, Minneapolis, and San Francisco, he confirms it has pulled the plug on its partnership with Curbside. That program had been testing in more than 120 stores around the country. Target is still actively expanding its Cartwheel and Order Pickup.
And Walgreens canned its in-store pickup program early this year.
“Everyone is still in test mode,” says Weitzel. “My guess is that Target found Curbside wasn’t generating enough incremental gains for them, and they’re just taking a pause.”
A big part of the profitability problem, he says, is the construction of stores themselves. America’s 35,000-plus supermarkets are built to make it easier for humans who browse an entire store, not online shoppers clicking on a much smaller universe of items. Inventory needs to be managed differently. Produce, meat, dairy and frozen foods pose their own logistical challenges. “Retailers are going to have to rethink store design, layout, flow and distribution. But it is simply the price of poker these days. As consumers move toward omni-channel shopping, stores are going to have to do it to stay competitive.”
And even if profits aren’t there yet, he says the news really is rosy for retailers. “Stores are reporting that online orders are growing fast, even doubling. And while that’s off a small base, it’s an area stores have a real advantage over Amazon, which can’t handle refrigerated items as well as grocery stores can.”