Figuring out Walmart’s Last Mile Delivery Strategy

In all fairness, Walmart should be applauded for the creative approach it is taking to solve the last mile delivery issue.

The U.S. supermarket and grocery market is big business. Estimated at $632 billion, it is dominated by the likes of Walmart, the largest player in terms of revenue, followed by The Kroger Co. and Albertson’s Cos. Inc. However, like other industries, the grocery market is being disrupted by e-commerce players and in particular, Amazon.

Amazon moved into the physical grocery space by acquiring Whole Foods in 2017. Prior to that, and still going strong, Amazon Fresh provided last mile delivery of grocery items from its warehouses to customers. Today, Amazon Fresh is linked to Whole Foods with the added option of picking up at the store. In addition, Amazon Prime Pantry continues along. This service offers Prime members to shop for nonperishable food products and household items for a monthly or annual subscription.

It’s a tough market to crack but Amazon is achieving some success. Groceries sales for the online giant increased 45% in 2018 from 2017.

But, what about the largest supermarket and grocery retailer – Walmart? Walmart has been chasing Amazon for years and has stumbled a few times. With the acquisition of Jet in 2016, however, it appears that Walmart is gaining traction and has steadily been building its last mile capabilities.

Beginning in 2017, Walmart acquired Parcel, a New York-based startup that handles scheduled and same-day delivery services in New York. Walmart planned to utilize the startup’s technology and network of delivery employees to ramp up its own same-day delivery offerings for both and in New York City. The acquisition was also expected to help reduce operating costs associated with deliveries.

The Parcel acquisition was a smart move but here’s where Walmart’s last mile delivery strategy starts to take a few interesting routes. First up, the use of autonomous vehicles. Walmart and Waymo, formerly Google’s self-driving car project, are piloting a program that will allow consumers to make their grocery pickups with the help of an autonomous vehicle. Participants in Waymo’s “early riders” program will be able to take a driverless shuttle service to and from Walmart whenever they purchase groceries from using the retailer’s online grocery pickup service.

A few months after this announcement came word that Walmart, Postmates and Ford teamed up for a joint pilot in Miami to explore how they can use self-driving vehicles to deliver groceries and other consumer goods.

And if that wasn’t enough with the autonomous vehicle pilots, Walmart and Udelv announced at CES that Udelv vans would deliver groceries, on behalf of Walmart, in select locations.

As Walmart tests autonomous vehicles for delivery services, the company is also partnering with a number of crowd-sourced last mile delivery providers, depending on location, including DoorDash, Postmates and Deliv. It was recently announced that Walmart added Point Pickup, Skipcart, AxleHire and Roadie to the list of delivery providers with a larger expansion to take place in “the coming weeks”.

But wait, there’s more. Walmart tried to encourage its own employees to deliver to customers’ front steps and earn extra pay for doing so. The program quietly ended with no official explanation.

Continuing on with Walmart’s last mile delivery strategies, Walmart partnered with Bringg, a start-up company that offers visibility to retailers’ delivery operations. The pilot program (yes, another one), called Spark Delivery, focuses on fulfilling customers’ online grocery orders via…yes, you guessed it, a crowd-sourced delivery workforce. Delivery Drivers, Inc. will handle the administration of driver management including the recruiting process, screening and background checks, payments, accounting and other services.

Bringg’s technology solution will bring such services as optimized driver schedules, automatic dispatch orders, drivers to communicate their availability and in turn communicate to drivers by way of smart alerts to make sure deliveries are picked up, queued and delivered on time.

Spark Delivery will not impact Walmart’s relationships with other crowd-sourced delivery companies. Instead, Spark Delivery, combined with third-party crowd-sourced delivery providers, is supposed to help Walmart reach its goal of 100 markets within the year representing 40% of U.S. households.

In all fairness, Walmart should be applauded for the creative approach it is taking to solve the last mile delivery issue. Last mile is the most expensive piece of shipping costs representing anywhere from 28% to 53% (depending on who you ask) of total shipping costs.

But included in shipping costs is customer satisfaction. If the delivery is successful, the customer will be happy and remember the delivery provider. However, if the delivery is unsuccessful, who will the customer complain to? Walmart.

A word of advice for Walmart, make sure the customer experience is the same across all of the last mile delivery platforms. This may prove difficult with the many different routes that Walmart is taking but even though costs are important, the customer is more important.

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