Walmart doubles down on deliveries to attack Amazon Prime

Register now

Walmart is adding delivery options in a direct attack on Amazon Prime, though the mega-retailer's online-powered fulfillment efforts have hit potholes in the past.

Its newest offering is called Delivery Unlimited, which at $98 a year undercuts Amazon Prime's $119 fee. Walmart on Thursday said it would expand the program to 1,400 stores this fall, or all 200 metro areas where its Grocery Delivery program is available. Walmart is also expanding its general online Grocery Delivery, and will extend Delivery Unlimited in concert with that growth — with a goal of covering 50% of the U.S. by the end of the year.

Walmart has been testing Delivery Unlimited in Houston, Miami, Salt Lake City and Tampa, and says the results have been positive. But Walmart has made several forays into online delivery with mixed results.

The big box retailer has used partnerships, such as a collaboration with Instacart, and its own in-house service. Walmart has also deployed its store employees to deliver items on their way home, and partnered with crowdsource delivery companies. One of these companies, Deliv, quit a pilot program with Walmart, allegedly because its drivers had to wait up to 40 minutes at Walmart stores for their orders.

Walmart pared down its staff delivery program following pushback from employees who were delivering groceries during off-hours. And some of the "gig economy" drivers Walmart uses for deliveries told Reuters they would choose other, more lucrative delivery jobs for restaurants if available at the time. Walmart has additionally offered discounts for online orders that consumers pick up in stores, creating a deterrence to selecting delivery.

Walmart is also testing driverless delivery, partnering with automotive technology company Udelv on a pilot program in Arizona. Udelv's van, Newton, reaches 60 mph and can carry up to 32 orders at a time, using sensors and driving software to enable autonomous delivery.

Walmart did not answer questions about its delivery infrastructure on Thursday.

"Delivery subscription is hard to do, but hard is good," said Richard Crone, a payments consultant. "These are consumers who are committed to buying before they make a payment."

As an alternative to its $98 annual fee, Delivery Unlimited offers a monthly $12.95 subscription rate for an unlimited number of deliveries.

By supporting subscriptions for delivery, Walmart is creating recurring revenue — and is also building a reliable base. These consumers are stickier than one-off shoppers and provide a steady, predictable stream of business that can expand as Walmart expands its range of services and deliveries.

Walmart recently collaborated with Google to support voice ordering online, though Walmart faces additional challenges in voice ordering, given Amazon Alexa's commanding lead in enrolled users. Walmart's other moves include a $3 billion investment in e-commerce company Jet.com, which has improved Walmart's ability to localize digital shopping and payments. Walmart has additionally invested in its mobile payment app, which could benefit from an increase in predictable users who shop and pay online — and are already paying ahead for a delivery service.

"Prepaid is the ultimate loyalty," Crone said. "That's what Amazon Prime is and that's what Walmart's new offer is."

Ready for prime time?

Even though Walmart's new service is focused on groceries — a product category where Amazon has struggled — it is still playing catch-up.

Amazon earlier this year introduced "free" one day delivery for Amazon Prime customers. The move has been expensive for Amazon, but has given the company a boost in performance, as one-day delivery contributed to a 20% growth in overall revenue in the second quarter of 2019, and fed a trend toward shoppers buying more items during a shopping session.

Amazon Prime's one-day delivery is seen as a direct assault on brick and mortar retail. Writing for PaymentSource in August, Roadie's Will Walker said Amazon Prime's delivery poses a direct threat to traditional retailers by automating the "last mile" of fulfillment, combined with other e-commerce and shopping options.

Amazon has additionally spent billions of dollars acquiring camera and doorbell technology to improve the speed and security of delivery. Amazon's Whole Foods offers free delivery for Prime members, and directly ties the service to other Amazon services, such as streaming content.

For reprint and licensing requests for this article, click here.