Walmart To Provide Last-Mile Delivery Service For Other Businesses
Imagine ordering a dozen donuts from a local bakery or new patio furniture from a major Walmart competitor and having Walmart deliver it by Spark delivery, drone or some other autonomous means provided by the retail giant. Well, you don’t have to imagine that.
Bentonville-based Walmart announced Tuesday (Aug. 24) plans to scale a program it calls GoLocal to make final-mile deliveries for businesses of all sizes.
“In an era where customers have come to expect speed and reliability, it’s more important than ever for businesses to work with a service provider that understands a merchant’s needs,” said John Furner, president and CEO, Walmart U.S. “Walmart has spent years building and scaling commerce capabilities that support our network of more than 4,700 stores and we look forward to helping other businesses have access to the same reliable, quality and low-cost services.”
Walmart said it has been piloting the service over the past several months and is now expanding to more than 500 markets just ahead of the holiday rush and amid the backdrop of rising freight costs and shortages of carrier capacity. At the heart of this project, Walmart is aiming to create another revenue stream by using its technology and people. Walmart will not use third-party drivers but instead, rely on its Spark delivery network and other modes of proprietary transportation.
“We were looking at different potential revenue streams, ways to commercialize the capabilities and scale that Walmart has – and so we’ll think about what that means as this program unfolds,” said Tom Ward, senior vice president of Walmart’s U.S. last-mile business.
Ward said Walmart has worked to develop reliable last-mile delivery and the time to scale it is now. He said businesses of any size can plug into Walmart’s platform through an API access that will ping Walmart when a delivery needs to take place. A Spark driver is then dispatched to the business to pick up and deliver the order and Walmart will collect the consumer response data from the transaction. While fees were not discussed, Walmart said the cost is competitive and it customizes the service to each retailer’s individual needs. Walmart declined to release names of its partners for GoLocal, but did say there are national contracts involved and some business-to-business contracts.
Retail consultant Carol Spieckerman, CEO of Spieckerman Retail, noted last month that Walmart would make its Adobe-enabled cloud-based tech and fulfillment service available to smaller retailers. GoLocal marks the next step in Walmart’s build-and-parlay platform monetization strategy.
“Walmart rarely launches capabilities in isolation and GoLocal is no exception. Walmart’s recent moves also exemplify the rise in private solutions – retailers utilizing other retailers’ capabilities without revealing the source. Given Walmart’s scale, small-to-medium-sized retailers would be wise to let Walmart do some heavy lifting, perhaps literally,” Spieckerman told Talk Business & Politics.
Scott Benedict, director of retail studies at Texas A&M University, said it does look like a way for Walmart to find new ways to serve customers. He said it is also a way for Walmart to improve its capabilities with insights gleaned from the partnerships. Benedict said there are other providers in the final mile space and Walmart will have to figure out their niche.
“How will Walmart differentiate their service from a growing number of delivery service competitors,” Benedict said.
The service that Walmart is trying to scale and leverage is its Spark delivery program that was launched in 2018. Walmart said its delivery program now covers nearly 70% of the U.S population. The deliveries in the GoLocal program will be “white label” according to Ward, who said the client’s branding will take precedence, but Walmart will get an alternative revenue stream with the service.
FINAL MILE COMPETITON
Clint Lazenby, partner at Legacy Retail in Rogers, said Walmart is having trouble gaining real traction against Amazon or even Instacart that continues to grow its online share. He said the recent Adobe partnership was a good first step in Walmart becoming a toll collector for those who use its assets.
“If Walmart is going to take the step to create a new business service to solve other retailers e-commerce challenges they need to offer a complete, seamless and integrated set of solutions. Doing this is a ton of work and expense in the short run. They will have to generate return over the longer run,” Lazenby said.
He said for the effort to be successful long term Walmart must establish enough of a foothold to make it hard for clients to switch to a competitor. That is likely going to mean Walmart will need to offer more benefits with its service in the highly competitive field of final mile.
The move also comes as multiple reports emerged recently about third-party delivery services frustrated with pickup and delivery orders from Walmart. In February DoorDash surveyed its more than 1 million independent drivers asking them to share their “experiences” about deliveries from Walmart. The delivery service said the biggest complaints about picking up orders at Walmart were the wait time and low tipping.
T.D. Davis, an independent DoorDash driver in the Dallas/Fort Worth metro, told Talk Business & Politics he does not like to pick up orders from Walmart because of the wait times and some items are often bulky. He offered another example of lots of bottled water that has to be hauled up two flights of stairs for very little tip. He said more money can be made delivering burritos from Chipotle Grill or seafood from Pappadeaux Seafood Kitchen where customers are accustomed to tipping.
Benedict said Walmart does have the scale to undercut prices of competitors that could appeal to small businesses, if the service rendered is comparable to what they were getting with previous delivery partners. He said it will be interesting to see if Walmart is able to scale the service ahead of what is expected to be a busy holiday season.