Walmart said Tuesday it will start farming out its delivery service, using contract workers, autonomous vehicles and other means to transport rival retailers’ products directly to their customers’ homes as fast as just a few hours.
The nation’s largest retailer said it will dispatch contract workers from its Spark delivery network, which was launched in 2018, to merchants’ stores to pick up items and then bring them to shoppers. Over the past year, Walmart has doubled Spark’s coverage to more than 500 cities nationwide, providing access to more than 20 million households.
Walmart, which is based in Bentonville, Arkansas, aims to tap into its ties with local communities, particularly businesses in rural areas that have struggled to provide their own delivery services.
The strategy will pit Walmart against delivery services run by the likes of Uber and DoorDash. And it comes as Walmart moves to expand its sources of profits and revenues beyond its core retail businesses. It echoes Amazon’s diversification move with its Amazon Web Services cloud computing unit, which the online behemoth built for itself and now sells to other businesses.
Last month, Walmart began offering small- to medium-size businesses the e-commerce technology it developed to let shoppers buy products online and pick them up at stores. It’s part of a partnership with technology provider Adobe.
Walmart said the delivery service, Walmart GoLocal, has already signed a number of deals with national and small-business clients, although it did not name them. It declined to offer figures on the investment or financial targets for the service. Deliveries to the other businesses will begin in the next few months.
The moves are happening as the pandemic has deepened shoppers’ appetite for speedier deliveries, putting more stress on smaller retailers that can’t meet their expectations. Walmart itself has been relying on DoorDash and other crowd-sourcing services as well as its own workers to serve its own customers. But it has also been expanding its Spark platform that until now has not delivered non-Walmart goods.
Shoppers ordering anything from cupcakes to gadgets at their local stores won’t know that Walmart is involved. They buy the goods on their local store website and then the store activates the Walmart GoLocal delivery. Walmart said it will be a white-label service, so deliveries will not be made by Walmart-branded vehicles.
“This is a smart tactic that has more upside than downside,” said Jason Goldberg, chief commerce strategy officer at Publicis Communications, part of Publicis Groupe SA.
Goldberg noted that the more deliveries Walmart can make, the lower the costs and the more profitable each delivery becomes. By working with different businesses with different needs, it can also manage peaks in ordering. Walmart will have an advantage in the competition for gig workers because it can offer more shifts to those looking for flexibility.
The only downside is that Walmart is potentially giving up business to some of the local players, Goldberg said. For example, a customer may prefer buying a birthday cake from the local bakery and having it delivered in the next few hours, rather than picking one up at Walmart, he said. But Goldberg said he believes the benefits from having a broader deliver network outweighs those small competitive disadvantages.
Goldberg said that it’s possible Walmart could use the sales data from all the third-party deliveries to inform its own future plans. But he doubts they would do that, given the antitrust scrutiny Amazon is facing.
During a call with reporters, Tom Ward, a senior vice president at Walmart’s U.S. division, said that fees for the service will be negotiated on a case-by-case basis. The delivery time could be as fast as a few hours or up to two days. Walmart said it could eventually use drones for delivery.
“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 of Walmart’s U.S. division.