Walmart has been on a roll ever since launching its online grocery ordering and store pick-up. It’s been so good and profitable that the program is swiftly expanding with plans to reach 3,100 locations by the beginning of 2020. The service is currently offered at 2,450 stores.
Is the success measurable?
The best proof of this success is in the numbers – digital sales are up by 37% in the first quarter with expected continuous rise. Online grocery ordering is almost solely responsible for such good numbers. It is expected that 33% of all Walmart’s digital sales will come from groceries by the next year.
How does Amazon compete with Walmart?
The report comes as a surprise to consumers and analysts alike, especially given the fact that Amazon acquired Whole Foods two years ago and hasn’t been able to overpower Walmart so far. Moreover, Walmart doesn’t just halt Amazon’s efforts to sell more groceries online, the giant is expanding its consumer base and attracting new customers that have shunned Walmart before. Those people spend more shopping online than they would in-store and thus are very valuable to any retailer.
Is Walmart getting better than Prime?
This is a hard question to answer. Amazon has been working to integrate Whole Foods grocery ordering experience into its Prime membership. Prime members can pick up their grocery orders in 30 markets and delivery is free, while Walmart charges $9.95 per order.
The main reason why Walmart is ahead might be the sheer number of its locations, 2,450 so far. Orders can be delivered from 1,000 locations. That is very hard to compete with. According to its optimistic plans, the retail giant will be able to offer order pick up to 80% of population and delivery to 50% by the end of the year.
- $10 OFF Grocery
- Free shipping on $50+ Grocery Order
- Up to 80% OFF Rollbacks
This convenience factor makes grocery order very attractive. So attractive in fact, that according to a report from Numerator, 65% of orders came from Prime members. For now, Walmart wins here hands down.
Before Walmart business executives get on the celebration, it’s worth noting that online ordering has a negative impact on its profit margins. While the prices of items online and in-store remained virtually the same, extra personnel had to be hired to prepare and deliver the orders to the cars and homes. This move increased the number of sales, but without a quantifiable payoff for now.
Who are the new customers?
The online order customers are often new to Walmart, however hard that might be to believe. Actually, 40-60% of orders were placed by new customers. Not only that, those new customers are big spenders. An average online order is $125, while in-store purchases average just $50.
It looks like Walmart is finally attracting a new crop of customers who are interested in convenience more than the bottom line. This means a direct clash with Amazon, whose customers are all like that.
What does the future hold for Walmart?
While there is no significant profit from growing online orders, Walmart is building a new consumer base with a great future promise. Gross margin is already better due to influx of people with spending power. The retailer is having a better merchandise mix and e-commerce margins than ever before, including 3.4% comparable store sales in the first quarter.
While all the numbers are looking good and competition is left behind, Walmart will have to continue investing in convenience and service if it wants to keep the newly acquired customers. Management should keep pushing forward even after 3,100 locations will be equipped with ways to pick up groceries. Innovation is a key word in our fast-pacing retail environment and Walmart can rest assured, target and Amazon will keep finding ways to get their customers back.