By Matthew Boyle, Bloomberg
Walmart plans to expand its grocery home-delivery service to more than 100 metro areas this year, a sign its food fight with Amazon.com is heating up.
The service, currently in six cities, will roll out to more than 40 percent of U.S. households by the end of the year, the company said on Wednesday. Deliveries will be handled by Uber Technologies and other providers, and will carry a $9.95 service fee — with a $30 minimum purchase.
“We’re moving fast,” Tom Ward, Walmart’s vice president of digital operations, said in an interview. “We will be pretty aggressive with it.”
The move into home delivery is part of Walmart’s broader push to get more of its in-store shoppers to start buying online as well, where they typically spend twice as much. It also complements Walmart’s rollout of curbside grocery pickup, now available in 1,200 stores and coming to an additional 1,000 this year.
Walmart’s online business had been a bright spot for the chain, but it stumbled during the holiday season. Inventory snafus hurt sales, and investors have fretted over the impact that its e-commerce initiatives will have on profitability.
Walmart will compete against Amazon’s Prime Now service, which offers free two-hour delivery to members of its loyalty program. That service has supplanted its Amazon Fresh program, which launched a decade ago but has been scaled back. Both companies have also introduced services that allow delivery people to enter homes and leave packages inside.
Other big grocers, such as Kroger and Costco Wholesale, use Instacart’s personal shoppers to handle deliveries. Target, meanwhile, agreed to acquire delivery startup Shipt last year to expand its capabilities.
In Walmart’s case, the orders will be picked by in-store employees, who will receive three weeks of additional training. Orders placed by 1 p.m. will be delivered the same day. The $9.95 delivery fee could “probably” be reduced if the service becomes more efficient, U.S. stores Chief Executive Officer Greg Foran said at an investor conference Wednesday. Kroger’s Instacart service, by comparison, is now available in 45 markets and typically charges $11.95.
Foran said Walmart’s home-delivery service gives shoppers more choices. It’s also brought in new customers in the six cities where it’s currently offered, which include Dallas and San Jose, California.
“We’re going to gain customers who might not have access to a brick-and-mortar store,” Ward said.
Online sales comprise just a fraction of the $800 billion U.S. grocery market — a smaller share than in countries like the U.K. or South Korea — but consumer acceptance is growing. While only one in three shoppers currently purchase groceries online for home delivery, about six in ten expect to use it more in the next five years, according to a survey of 1,100 people conducted by industry researcher Field Agent.
That has U.S. grocers racing to meet demand, Chris Medenwald, a marketing manager at Field Agent, said in a report.
“It seems, at long last, groceries are making the transition to the digital age,” he said.