retail news in context, analysis with attitude

Walmart reportedly has begun testing an e-grocery service in Northern California under the Walmart To Go sobriquet, allowing “customers to purchase food, health and beauty products, medicine and other basic household goods online and have them delivered to their doorsteps for fees starting at $5,” the Wall Street Journal writes.

The Financial Times puts the stakes in stark relief: “The world’s biggest retailer began the ‘limited test’ on Saturday as it looks to online commerce to offset the mediocre growth performance of its bricks-and-mortar stores in the US.”

According to the Journal story, “Wal-Mart said the test was limited to a single market and may not be expanded further, depending on results. Wal-Mart declined to elaborate further.

“But the world's largest retailer, which already operates a successful home grocery delivery business in the U.K. through its Asda store chain, appears serious about the potential of leveraging a blend of store and Web retailing to provide services pure online competitors cannot.”

The Reuters story notes that “the online grocery business has proven difficult to succeed in given the perishability of fresh food and the industry's small profit margins, analysts have said. If WalMart decides to stay and expand in the online grocery delivery business, its competition would include Peapod and Amazon Fresh,” both of which have been expanding.

FT suggests that “online groceries are regaining popularity among US retailers and consumers after several start-ups went bust a decade ago after trying to expand too quickly during the heady days of the first internet boom,” but says that Walmart’s “internet credentials are limited,” especially when compared to more experienced competition in this segment.

The New York Times story says that “for the test, Wal-Mart is shipping groceries from a San Jose store, packing them in tote bags and delivering them in temperature-controlled trucks that the company owns. Deliveries can be scheduled for the next day.

“Currently, the groceries available lean toward prepackaged goods. Customers cannot order beef to specifications, for instance - they must buy precut meat in a range of packages. And in the produce category, while fresh mangoes and bananas are available, oranges and lemons come in bags of several pounds rather than individually.

“Its prices are competitive. A 64-ounce carton of Horizon milk was $3.50 on Wal-Mart’s site, $3.99 from Peapod and $4.29 on Fresh Direct.

“Sixteen ounces of celery at Wal-Mart to Go was $1.98, where 16 ounces of celery at Peapod was $3.29 and at Fresh Direct $3.49.

“On shelf-stable food like crackers and candy, Wal-Mart had a broad selection — it sells 12 varieties of Triscuits, for instance, versus 10 at Peapod and two at Fresh Direct.”
KC's View:
This moment was inevitable. We’ve been saying that here on MNB for years. The only surprise, I must confess, is that it took Walmart so long.

I”m also a little surprised that Walmart has gone for a delivery model; I suspect that over time, the Bentonville Behemoth will shift to a store pickup model, which is easier and cheaper to manage, not to mention more profitable than delivery.

Walmart will take its time, but not too much time, to roll this out. The stakes are too high, and the potential competition too formidable.

And the competition, by the way, will also ramp up its offerings. Which will raise the stakes for everyone.