What new winds are there in the online grocery industry?
Walmart is reporting big financial gains and most of them come from ever-growing grocery pick-up service that retailer has been so focused on. Grocery pickup leads to the expansion of grocery delivery, which seems the logical next step as more and more consumers desire extra convenience in their lives.
Walmart is scaling grocery shopping in every direction possible: delivery, pick-up from the store, the creation of pickup towers and lockers, and even delivery into customers' homes is in the developmental stages.
This latest one is a bit tricky due to privacy and security concerns, but Walmart is going forward with first test runs scheduled for this fall in select areas. Soon there will be a usual practice to come home and find all your shopping done for you, groceries at home and in the fridge.
For those of us that won't be willing to drive to the grocery store even for a pickup, Walmart is preparing one-day delivery for $35 and unlimited deliveries for $98 per year.
The unlimited deliveries is the most recent focus point for Walmart as the retailer believes it can be the most popular new program destined to change the way we get our groceries and the new way for Walmart to make money.
- Free Delivery on Grocery Order $50+
- $10 OFF Your Grocery Orders of $50+
- Pickup at The Store with any Order $50+
What is the competition doing?
The competition is not asleep either. Amazon has its Prime membership program, where members pay $119 per year and get free delivery of everything, including groceries.
is moving forward too with its partnership with Shipt, a service of unlimited deliveries for $99/year.
Finally, Instacart, which kind of started all this delivery business, reduced its annual price from $149 to $99. So yes, the competition is fierce and there is no room for mistakes.
In order to win this game, retailers strive to provide a very clear path for customers – pay one time and you will never have to worry about any delivery fees. This is especially important for groceries because this segment of all commerce, online and physical, is growing fastest, with expected jump by 18% this year, bringing in $20 billion.
While it's hard to beat Amazon at their online order and delivery game, Walmart, Target, and Kroger can utilize their physical presence to increase sales. Kroger, for example, saw their online grocery sales increase by 66% and jumped into a third place overall with that.
Consumers love a choice of how much they want to pay for grocery delivery and more of them come to try it online due to this liberty of choice. Target's Shipt is adding another $10 per order for extra convenience, but Walmart is going the other way and adding an option for unlimited delivery for extra fee on top of already existing $10 per order.
Can unlimited delivery be profitable for retailers?
The delivery itself is the costliest part of the entire ordering and receiving process of grocery shopping online. All the changes and new implemented delivery methods can increase the number of customers and orders, but it will likely result in $1 billion loss for Walmart. This loss includes more than just groceries, but it's most definitely due to the cost of transportation and freight, which simply can't be offset by increasing orders of apples, milk, and bread.
Walmart is not the only retailer reporting losses despite significant gains in business. Amazon incurred $28 billion of delivery loss last year all due to shipping. Retailers like Walmart can price their groceries below Amazon, but many other consumer benefits are hard to compete with, so there is a constant need for innovation and for finding new ways to please the consumers.