Logistics challenges behind the scenes reportedly doomed one of Walmart’s forays into same-day delivery, but Cowen managing director Oliver Chen says the big-box retailer should focus on a key area of opportunity: curbside pickup.
Walmart had partnered with Google-backed logistics startup Deliv, in addition to Postmates and DoorDash, to shuttle same-day grocery delivery orders to customers’ homes. However, a Reuters report states that Deliv terminated the relationship in January amid complaints that drivers “frequently” spent 40 minutes or more waiting for Walmart employees to bring delivery orders to their vehicles. That’s because Walmart gave priority to in-store shoppers over couriers, according to the report. A Reuters source further described Walmart’s store operations as “a huge problem” that was unable to keep pace with the flow of delivery orders.
However, some analysts believe trying to go head-to-head with Amazon in the last-mile delivery battle might not be Walmart’s wisest decision, though the big-box retailer recently announced that any marketplace merchant can use another startup, Deliverr, to offer free two-day shipping on par with Amazon Prime.
In announcing its Q4 2018 earnings, Walmart called out the role that curbside grocery pickup has played in an e-commerce business that grew 40 percent for the full year. Speaking to CNBC, Cowen’s Chen said, “Store pickup will be huge because customers love this service,” adding that it has a “very high Net Promoter Score.”
Data shows that Walmart customers spend twice what they would in store when choosing the curbside service, Chen added. Meanwhile, Loop Capital’s Andrew Wolf believes delivery will be Walmart’s “next growth vehicle.” In-house Loop research indicates that millennials currently aren’t spending more of their dollars on services that deliver to their homes because they’re unwilling to absorb the additional fee. Despite Walmart’s robust earnings and e-commerce growth, Wolf believes employing 35,000 people who fulfill digital orders is a drag on profit margins that robotic process automation could reverse.