September 26, 2008
Is Walmart Planning to Sell Groceries Online?
Walmart has not launched an online grocery service but a beta test listing of thousands of products as part of the company’s “search in store” function raises the question of whether the world’s largest retailer will take the next step and begin offering the products for sale on its website.
The retailer, if it is planning a home delivery and/or store pickup service, isn’t letting on. Ravi Jariwala of Walmart.com told the Financial Times that the company’s “focus at this time is allowing customers to check availability and product details of top consumable categories sold in stores. We designed this to fit the way our customers shop and to make trips to Walmart stores more efficient and convenient.”
Walmart does currently offer a “site to store” feature that allows customers to order items online and go to a store for pickup. Mr. Jariwala did not rule out that Walmart could extend this to include the new categories listed on its website.
“We will continue to evaluate our merchandise assortment to determine where we may expand,” he said.
Walmart’s Sam’s Club currently allows customers to use its “click and pull” service to pre-order items for pick-up at its warehouse clubs. Sam’s does deliver a small number of drink and snack items as part of a service offered to business customers.
Discussion Question: Do you see Walmart getting into the online grocery business? What would it mean for the competition if it did?
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This one seems pretty obvious to me. The two options, of either having customers order then collect or delivering in densely populated areas, could both work. It might even attract people who are resistant to actually going into a Walmart. (And there are still a few of them out there, I think.)
Since no one has figured out how to make profit selling groceries online, I doubt Walmart will get into it. By online, I mean normal weekly shopping, not specialty products. I think having Walmart list groceries online will assist shoppers who are thinking of cherry picking conventional competitors to see if those items listed in competitors ads are any lower.
I guess, if they want to start losing money. I have yet to see an online grocery operation actually succeed. There were a few operations here in Toronto but most withered away or were swallowed up by a bricks and mortar chain.
I’m not sure customers get the grocery online game. Picking fruits and vegetables is a very impulsive transaction. We need to see it, smell it and feel it before we can be comfortable with buying it. I suspect if anyone can make it work, it’s either Amazon or Walmart.
I agree with Nikki as well re: Retailers only selling “top-selling items.” And, in point of fact, Walmart is shrinking it’s Neighborhood Market–in Phoenix–to something much closer in size to Tesco’s Fresh Express.
While grocery delivery may not “work” as planned, independent grocery pick-up services have started to “spring up.” Similar to Walmart’s “site to store,” these services–like Retail Relay–take your order, and provide depot locations for pick-up.
In the end, the secret to ANY of these systems is the ability to track and analyze purchases, so as to “suggest” the next order (i.e., the Long Tail).
Walmart would not be my bet for getting online grocery right, but that doesn’t mean they won’t try–I think it is certainly making a comeback. Almost every grocer I know is toying with it in one form or another.
I can see online groceries solving one challenge in the industry: SKU proliferation vs. shelf space. If there is any retail vertical that could benefit from the “endless aisle” concept, it’s grocery. How else will I ever be able to get my hands on Tide High Efficiency Cold Water Laundry Detergent with a Touch of Downy? In Spring scent?
While I’m being somewhat facetious here, I’m also deadly serious. Fresh is not the answer for online grocery selling, but I could see a day where grocery stores look more like farmers’ markets, offering basically everything that is perimeter today, and drastically shrinking center-store to only top-selling items. The rest could be covered by order online-pickup in store, or order it at the store kiosk for delivery to home.
If grocers can get the user interface for replenishment shopping right (hello purchase history from your club card), and can get delivery from distribution center or distributor to home down to 2-3 days max, then there is a real opportunity–selling all that “long tail” stuff that never makes it to the shelf, where space is a premium.
I agree with Nikki, the Long Tail items are a perfect fit for Walmart which offerings practically everything anyway. Why put it all on the shelf?
As regards online grocery delivery, this usually works in areas of high population density and higher income demographics. Now, those two requirements are not typically Walmart’s strengths, having their legacy in C&D counties and lower/middle income households.
However, these are trying times. Walmart is on an upswing. This could work if Walmart could infiltrate these households with the correct assortment and marketing efforts. I am talking low prices on Kashi and Soy Milk and steak. Actually, Costco is in a better position to capitalize on delivery to these homes. But Costco’s larger sizes on product don’t work well for denser areas where dwellings are smaller. Again, assortment is important.
I also agree with Gene. It’s just a matter of time. In the next few years, retailers will need to have this capability to keep up with competition. It is one more aspect of service that some people will be willing to pay a premium for.
Walmart should test the idea with the expectation that they will learn. Over time, they will be successful. I don’t expect that it will be successful and profitable right out of the shoot, but it is the trend and Walmart has to be there.
Walmart has one of the worlds most sophisticated data warehouse systems. They will be able to analyze sales and the profitability of the program by integrating shipment costs with the new POS from the web. Other companies are doing it, I would expect Walmart to give it a try.
Serving best customers by creating home delivery is a natural evolution. Doing so isn’t without issues and problems. They will consider all the above issues and move forward when and where appropriate.
Depends on what the definition of “planning” is.
Of course they are looking at selling groceries online. Amazon and Walmart have been eying each other for years as competitors.
A few reasons why it will work…
1. Groceries are the category most often bought in most stores. Getting folks into the store (online or physical) is the holy grail. Getting them in every week or twice a week….whoo hoo!
2. Online shoppers buy bigger baskets and if they can add more stuff and not go into bricks and mortar stores they are VERY happy and VERY loyal. This is THEIR definition of convenience (as opposed to OUR definition, which drives OUR strategy).
3. Hate to shatter the MYTHS but online grocery shopping can be and is in many cases VERY profitable, particularly when married to a stock pickup model. You DON’T have to be in NYC or Boston…Cary North Carolina does quite nicely. And the old saw about picking your own fruits and vegetables? I suggest we all go intercept a 40ish shopper or younger, preferably with kids and ask if she/he even knows what to look for, much less cares.
Online shopping for groceries is more popular today than yesterday and will be more popular tomorrow than today. That is proven over and over in the actual sales stats where same store sales growth continue to dwarf in-store sales growth (smaller base of course) and where basket growth does the same. At the same time using online resources to make in-store shopping more productive is also a winning and growth generating strategy.
Now…that said…there are some very demanding operational and site elements that are very tricky in online shopping. Can Walmart pull those off in a sustainable manner? That is the only real question.
I agree with Gene. Delivery works well only in high density areas like New York City. Many stops in spread-out areas dilute the efficiencies of the concept. Buying online to pick up at the store might be a good concept for Walmart. It’s worked well for Circuit City and Best Buy, among others.
Online grocery service will be successful. Economic and social trends are very much in its favor. However, the limiting factor of success will be population density. The online, home delivery retailer Fresh Direct can take advantage of efficient delivery. A truck can stop and make ten deliveries without moving the truck. That efficiency starts to fall part as the deliveries get spread apart.
Fresh Direct depot has 6,000,000 people in a 10 mile radius. Walmart’s distribution or store locations are quite the opposite.
I can foresee a Walmart success with the “click and pull” service. It eliminates the biggest challenge, the home delivery. The online grocery business with home delivery would be a stretch for Walmart, but if they do it, it will be successful. We can count on Walmart to have considered all the costs and complications and overcome them.
I am quite confident that in the next ten years, online and offline shopping will merge to a remarkable degree. Many years ago, if you were going to take a call, it would typically be either at home or at the office. Today, it isn’t a relevant question–because of cell phones you take calls wherever you are.
Commerce will evolve in that direction, too, with the internet being fully deployed within the store, either on the shopper’s personal communication device, phone, PDA or what have you–or an a device provided by the retailer.
The how and why of the purchase decision will be less dependent on the where, although the ambiance of the store will not disappear. However, the “where” will obviously seriously impact how the actual delivery of the merchandise occurs. UPS delivers or you pick-up at the store? But the mental process will be intimately intertwined with the ubiquitous mental crutch–the internet (and its evolved successor.)
On the consumer front, there are a few cohorts that would likely be quite happy if Walmart ventures into e-grocery. For example, it’s great for aging consumers, family caregivers, disabled/differently-enabled consumers, and busy workers who haven’t the time or desire to wander supercenter aisles. And let’s not forget that some others wouldn’t mind shopping Walmart’s groceries, but they shy away from the often crazy supercenter shopping experience.
One consumer hurdle will be any fees. Additional fees won’t work with Walmart’s core consumer and, in 2008, I hesitate to believe other cohorts will willing fork over extra dollars for staple items. If Walmart can figure a way around fees, then this could be a nice addition, for Walmart and consumers.
One of the best things about Walmart’s management: they’re willing to test innovative concepts. Sure, Walmart might test online grocery. But they’re unlikely to roll it out. The labor cost for picking and packing ruins grocery margins. And if Walmart offers delivery, the cost is even higher.
As for Fresh Direct, you can bet that if the company’s profits were worthwhile, they’d have rolled out the concept much faster long ago. Population density hurts as much as it helps: the New York metro area traffic congestion, parking problems, and outrageous vehicle insurance rates all combine to inflate costs tremendously. In May 1993, the NY Times reported average traffic speed in Midtown Manhattan to be 2.7 miles per hour. And traffic was much faster in those days.
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This one seems pretty obvious to me. The two options, of either having customers order then collect or delivering in densely populated areas, could both work. It might even attract people who are resistant to actually going into a Walmart. (And there are still a few of them out there, I think.)
Since no one has figured out how to make profit selling groceries online, I doubt Walmart will get into it. By online, I mean normal weekly shopping, not specialty products. I think having Walmart list groceries online will assist shoppers who are thinking of cherry picking conventional competitors to see if those items listed in competitors ads are any lower.
I guess, if they want to start losing money. I have yet to see an online grocery operation actually succeed. There were a few operations here in Toronto but most withered away or were swallowed up by a bricks and mortar chain.
I’m not sure customers get the grocery online game. Picking fruits and vegetables is a very impulsive transaction. We need to see it, smell it and feel it before we can be comfortable with buying it. I suspect if anyone can make it work, it’s either Amazon or Walmart.
I agree with Nikki as well re: Retailers only selling “top-selling items.” And, in point of fact, Walmart is shrinking it’s Neighborhood Market–in Phoenix–to something much closer in size to Tesco’s Fresh Express.
While grocery delivery may not “work” as planned, independent grocery pick-up services have started to “spring up.” Similar to Walmart’s “site to store,” these services–like Retail Relay–take your order, and provide depot locations for pick-up.
In the end, the secret to ANY of these systems is the ability to track and analyze purchases, so as to “suggest” the next order (i.e., the Long Tail).
Walmart would not be my bet for getting online grocery right, but that doesn’t mean they won’t try–I think it is certainly making a comeback. Almost every grocer I know is toying with it in one form or another.
I can see online groceries solving one challenge in the industry: SKU proliferation vs. shelf space. If there is any retail vertical that could benefit from the “endless aisle” concept, it’s grocery. How else will I ever be able to get my hands on Tide High Efficiency Cold Water Laundry Detergent with a Touch of Downy? In Spring scent?
While I’m being somewhat facetious here, I’m also deadly serious. Fresh is not the answer for online grocery selling, but I could see a day where grocery stores look more like farmers’ markets, offering basically everything that is perimeter today, and drastically shrinking center-store to only top-selling items. The rest could be covered by order online-pickup in store, or order it at the store kiosk for delivery to home.
If grocers can get the user interface for replenishment shopping right (hello purchase history from your club card), and can get delivery from distribution center or distributor to home down to 2-3 days max, then there is a real opportunity–selling all that “long tail” stuff that never makes it to the shelf, where space is a premium.
I agree with Nikki, the Long Tail items are a perfect fit for Walmart which offerings practically everything anyway. Why put it all on the shelf?
As regards online grocery delivery, this usually works in areas of high population density and higher income demographics. Now, those two requirements are not typically Walmart’s strengths, having their legacy in C&D counties and lower/middle income households.
However, these are trying times. Walmart is on an upswing. This could work if Walmart could infiltrate these households with the correct assortment and marketing efforts. I am talking low prices on Kashi and Soy Milk and steak. Actually, Costco is in a better position to capitalize on delivery to these homes. But Costco’s larger sizes on product don’t work well for denser areas where dwellings are smaller. Again, assortment is important.
I also agree with Gene. It’s just a matter of time. In the next few years, retailers will need to have this capability to keep up with competition. It is one more aspect of service that some people will be willing to pay a premium for.
Walmart should test the idea with the expectation that they will learn. Over time, they will be successful. I don’t expect that it will be successful and profitable right out of the shoot, but it is the trend and Walmart has to be there.
Walmart has one of the worlds most sophisticated data warehouse systems. They will be able to analyze sales and the profitability of the program by integrating shipment costs with the new POS from the web. Other companies are doing it, I would expect Walmart to give it a try.
Serving best customers by creating home delivery is a natural evolution. Doing so isn’t without issues and problems. They will consider all the above issues and move forward when and where appropriate.
Depends on what the definition of “planning” is.
Of course they are looking at selling groceries online. Amazon and Walmart have been eying each other for years as competitors.
A few reasons why it will work…
1. Groceries are the category most often bought in most stores. Getting folks into the store (online or physical) is the holy grail. Getting them in every week or twice a week….whoo hoo!
2. Online shoppers buy bigger baskets and if they can add more stuff and not go into bricks and mortar stores they are VERY happy and VERY loyal. This is THEIR definition of convenience (as opposed to OUR definition, which drives OUR strategy).
3. Hate to shatter the MYTHS but online grocery shopping can be and is in many cases VERY profitable, particularly when married to a stock pickup model. You DON’T have to be in NYC or Boston…Cary North Carolina does quite nicely. And the old saw about picking your own fruits and vegetables? I suggest we all go intercept a 40ish shopper or younger, preferably with kids and ask if she/he even knows what to look for, much less cares.
Online shopping for groceries is more popular today than yesterday and will be more popular tomorrow than today. That is proven over and over in the actual sales stats where same store sales growth continue to dwarf in-store sales growth (smaller base of course) and where basket growth does the same. At the same time using online resources to make in-store shopping more productive is also a winning and growth generating strategy.
Now…that said…there are some very demanding operational and site elements that are very tricky in online shopping. Can Walmart pull those off in a sustainable manner? That is the only real question.
I agree with Gene. Delivery works well only in high density areas like New York City. Many stops in spread-out areas dilute the efficiencies of the concept. Buying online to pick up at the store might be a good concept for Walmart. It’s worked well for Circuit City and Best Buy, among others.
Online grocery service will be successful. Economic and social trends are very much in its favor. However, the limiting factor of success will be population density. The online, home delivery retailer Fresh Direct can take advantage of efficient delivery. A truck can stop and make ten deliveries without moving the truck. That efficiency starts to fall part as the deliveries get spread apart.
Fresh Direct depot has 6,000,000 people in a 10 mile radius. Walmart’s distribution or store locations are quite the opposite.
I can foresee a Walmart success with the “click and pull” service. It eliminates the biggest challenge, the home delivery. The online grocery business with home delivery would be a stretch for Walmart, but if they do it, it will be successful. We can count on Walmart to have considered all the costs and complications and overcome them.
I am quite confident that in the next ten years, online and offline shopping will merge to a remarkable degree. Many years ago, if you were going to take a call, it would typically be either at home or at the office. Today, it isn’t a relevant question–because of cell phones you take calls wherever you are.
Commerce will evolve in that direction, too, with the internet being fully deployed within the store, either on the shopper’s personal communication device, phone, PDA or what have you–or an a device provided by the retailer.
The how and why of the purchase decision will be less dependent on the where, although the ambiance of the store will not disappear. However, the “where” will obviously seriously impact how the actual delivery of the merchandise occurs. UPS delivers or you pick-up at the store? But the mental process will be intimately intertwined with the ubiquitous mental crutch–the internet (and its evolved successor.)
On the consumer front, there are a few cohorts that would likely be quite happy if Walmart ventures into e-grocery. For example, it’s great for aging consumers, family caregivers, disabled/differently-enabled consumers, and busy workers who haven’t the time or desire to wander supercenter aisles. And let’s not forget that some others wouldn’t mind shopping Walmart’s groceries, but they shy away from the often crazy supercenter shopping experience.
One consumer hurdle will be any fees. Additional fees won’t work with Walmart’s core consumer and, in 2008, I hesitate to believe other cohorts will willing fork over extra dollars for staple items. If Walmart can figure a way around fees, then this could be a nice addition, for Walmart and consumers.
One of the best things about Walmart’s management: they’re willing to test innovative concepts. Sure, Walmart might test online grocery. But they’re unlikely to roll it out. The labor cost for picking and packing ruins grocery margins. And if Walmart offers delivery, the cost is even higher.
As for Fresh Direct, you can bet that if the company’s profits were worthwhile, they’d have rolled out the concept much faster long ago. Population density hurts as much as it helps: the New York metro area traffic congestion, parking problems, and outrageous vehicle insurance rates all combine to inflate costs tremendously. In May 1993, the NY Times reported average traffic speed in Midtown Manhattan to be 2.7 miles per hour. And traffic was much faster in those days.