Walmart Plots Online Grocery Growth Including Home Delivery

Ecommerce represents less than 1% of Walmart sales. The company's recent growth has been sluggish, but if the retailing behemoth can make this work profitably (a task that has eluded other major competitors), it could tubocharge its fortunes and possibly change the way consumers think about buying groceries. Up until now, ecommerce has been defined by a 'buy now, receive later' template, the exception being downloads of books, software and other intangible items. The truly massive change of which Walmart is capable, is shifting consumer expectations to include same-day delivery of tangible, high quality - and in this case perishable - goods. This might spur ecommerce growth - and it might also create significant numbers of new jobs. Barney Jopson and Alan Rappeport explain in the Financial Times:

"Walmart is exploring ways to take on online rivals by launching a test service in one Californian city that lets shoppers order fresh food on the internet for home delivery.

The world’s biggest retailer began the “limited test” on Saturday as it looks to online commerce to offset the mediocre growth performance of its bricks-and-mortar stores in the US.

Online groceries are regaining popularity among US retailers and consumers after several start-ups went bust a decade ago after trying to expand too quickly during the heady days of the first internet boom.

Walmart rose to supremacy in the US in the 1990s with low-price Supercenter stores that won it a reputation for ruthless efficiency and rigorous organisation.

But its internet credentials are limited and online retailers have joined ultra-discount “dollar stores” as serious threats to its US business.

Last week it jumped onto the social media bandwagon by acquiring Kosmix, a small Silicon Valley company whose social networking expertise it wants to use to explore new ways of reaching shoppers.

Walmart’s new pilot service lets customers order produce including fruit, vegetables, meat, seafood and bread for home delivery at an average fee of $5 to $10, said a company spokesman.

Called Walmart To Go, the service has been rolled out in San Jose, northern California, a city where Tesco’s loss-making bricks-and-mortar business Fresh & Easy has one store and is preparing to open two more.

Walmart declined to comment on how long the test would run, what it was seeking to learn, or the potential size of the online grocery market. Until now it has only sold dried and packaged food for delivery online.

Analysts are still divided on whether it makes economic sense to sell and deliver low-priced items such as food online.

Walmart’s move follows a similar experiment by Amazon, the world’s largest online retailer, which is selling groceries to customers in Seattle, its home city, via its AmazonFresh service.

Fresh Direct and Peapod, two online-only grocery companies, have been slowly expanding their services into several US states. Fresh Direct says it is profitable and is logging year-on-year sales growth of 20 per cent.

Some traditional grocery chains have been offering complementary online services in cities where high population density makes deliveries more cost effective.

Online sales currently make up just 1 to 2 per cent of the total market for grocery sales, according to the National Grocers Association.

Walmart is battling to revitalise its American business after seven consecutive quarters of sales declines at US stores open at least a year, which it attributes to strategic mistakes in pricing and product choice.

Deborah Weinswig, analyst at Citigroup, said last week that Walmart was “currently under-penetrated online, with e-commerce representing less than 1 per cent of total sales, by our estimates”.

The retailer also allows customers to order non-grocery products such as toys and electronics online and pick them up from one of its stores.