Walmart outlines 3 reasons why forward-leaning retailers are bullish on curbside pickup

BENTONVILLE, Ark. -- With its recent acquisition of Jet.com, a commitment to growing its online grocery business with a convenient grocery pickup option and an extensive investment against delivering a seamless digital shopping experience, Walmart is once again flipping the script on what it means to compete for America's shopping dollar.



The company's investment in grocery pick-up services represents the cover of that new script - and Walmart is expanding that service to 600 stores this year and 500 stores next year.



"There are  new  customers  coming  to  Walmart  because  of  online  grocery," Doug McMillon, president and CEO Wal-Mart Stores, told analysts. "It's  more  an  offensive  category  than  a  defensive category."



"We now have it in 80 U.S. markets or 500 locations. We'll be in 100 markets or approximately 600 stores by the end of this year," noted Greg Foran last week during the company's analyst day. "When we add online grocery, it improves the rest of the store, not just food, but GM as well. We lift our game," he said.



There are at least three facets to delivering the what, when and where on the customer's terms that make this a significant course redirection. First, McMillon noted that grocery pickup draws new customers to Walmart. Also, the service engenders a fierce loyalty among those customers who have tried it. Finally, the service represents a significant 70% to 80% cost savings as compared to those retailers playing the same-day delivery battle by eliminating the last mile of delivery.



"Actually one of the key things about grocery home shopping is the loyalty it drives to the store as well," noted Judith McKenna, COO Walmart U.S. "And if you think about the ecosystem that we're building between our online business and our physical business, actually encouraging people to use all of the channels that's available to them is really important," she said, adding that customers who take advantage of curbside pickup represent larger marketbaskets overall as compared to customers who don't.



Beyond customer acquisiton and loyalty, there are supply chain efficiencies associated with curbside pickup.



"Logistics will continue to lean into the future, as I said, about how goods are  moved and delivered," Brett Biggs, CFO and EVP Wal-Mart Stores, told anlysts last week. "We are really excited about how our capital allocation is changing. It's being geared more toward the future," he said. "The primary difference is in Walmart U.S. and it's from movement of capital from new stores to increased  remodels  and  other  strategic  customer  initiatives  like  fresh  and  online  grocery."



"The  foundation  has  been  laid  in terms of the warehouse network," added Marc Lore, president and CEO Wal-Mart ecommerce for Wal-Mart Stores. "Bringing together both marketplaces  - there's 20 million products on walmart.com [and] there's 15 million on Jet - we have two separate teams, bringing those catalogs together so both companies benefit," he said. "Leveraging the store capabilities with in-store pickup, I think, is a huge advantage because it avoids last-mile delivery costs, which is about  70% to 80% of total delivery  cost. If you're able to  fulfill stuff in an e-commerce  warehouse and you have enough volume to linehaul stuff directly to the store, your cost to ship is $1 a package. It's an incredibly powerful asset."



Both Walmart and Jet are currently experimenting with different ways to get food to the consumer, Lore added. "Right now, on Jet, we are shipping direct to the home from  a centralized  DC, about 15  million people we're serving right now and we'll continue to expand that. At the same time,  you have the acceleration happening in online grocery pickup at a Walmart store. And so one thing is for sure, we're going to be really focused on winning in fresh and consumables over the next couple of years. And we're just not quite sure what the final best way to do it is, but we're experimenting."



And Walmart isn't the only savvy retailer seizing the on the pickup opportunity. CVS in September announced its intention to grow its order-online-curbside-pickup program to 4,000 stores. "The response and adoption of CVS Curbside from our customers has been very positive," Brian Tilzer, CVS Health SVP and chief digital officer, told Drug Store News. "We actually saw CVS Curbside as an added convenience and way to create more visits to our store," he said. "Through our pilot testing, we found that on average, basket purchases were larger through online delivery and Curbside pick-up vs. in-store."