As recently reported by FreightWaves, the demand for last-mile services has increased by 50% in the last 18 months, driven primarily by the B2C companies. No brick-and-mortar seems more aware of the “Amazon effect,” or more capable of strong-arming their position, than Walmart. They are not alone however. Partnerships abound. Rumor has it just today that Target and Kroger are in talks about a possible merger. The move would possibly integrate the services of Shipt, a delivery startup it recently acquired.
The response comes only a month after Amazon’s February announcement that it will start offering Prime members free two-hour delivery from Whole Foods, which the company acquired last year for $13.7 billion. Target also announced earlier this year that it plans to offer same-day grocery delivery from half of its 1,800 stores using Shipt.
In one of many strategic “Amazon effect” moves, Walmart is now offering its customers grocery delivery. The retailer is launching the service, which offers same-day delivery in as little as three hours, across the U.S. this year. Walmart is charging a flat fee of $9.95 for delivery for a minimum order of $30.
Walmart says it will "aggressively" roll out the delivery service to more than 800 stores in 100 metro areas over the next several months, and ultimately reach about 40% of U.S. households by the end of the year. Walmart is partnering with Uber and other crowd-sourced delivery companies to make the “last mile” delivery. Bloomberg's Sarah Halzack notes, consumers are still warming up to online grocery shopping, signaling a last mile, delivery opportunity for retailers like Walmart to win shoppers away from Amazon.
Walmart and Target are also partnered with Google on voice-based shopping, which includes integrations with Google Express and Google Assistant, to combat Alexa. This allows customers to shop their site through the Google Express app or by saying things like “buy coffee from Walmart,” to place a voice order with Google Assistant’s help.
Those partnerships, and the new program being introduced last week, also allows retailers to increase shopper loyalty by supporting things like 1-click re-ordering, personalized recommendations, and basket-building, says Google. For example, if a customer integrates their Ultamate Rewards account (Ulta’s loyalty program) with Google, it will know what other products to recommend based on past order history when the shopper is searching for a particular item.
Meanwhile, Walmart has also filed for six patents, all involving drone technology. According to the filings, one drone can track pests and monitor crop damage using machine vision. To shoo off birds or beetles, the drones could fly by or shoot sprays of pesticide, serving as a next-generation of "scarecrows or shiny devices.” Notably, one of the patents is for autonomous bees, technically called pollination drones. The drones would also collect data on crop growth, which could assist farmers. That could make Walmart's food inventory more predictable and help the retailer reduce food waste.
While Walmart's exact goal for these patents is unclear, they may signal that the company hopes to gain more control over its food supply, according to Paula Savanti, a senior consumer analyst at Rabobank. Any tech geared toward improving efficiency at the farm level would benefit Walmart. It could also possibly allow them to anticipate supply problems and adjust with great agility. Overall, it's most likely that the company plans to offer the technology to partnering farms, with the goal of increasing efficiency.
According to Business Insider, the market for fresh produce is also growing, making investments in ag-tech a potentially smart move. According to a recent report, consumption of fresh fruits and vegetables increased steadily between 2011 and 2016, and annual gains will continue through 2021.
These efficiency gains would likely help Walmart compete with other corporations that offer groceries, especially Amazon, Savanti said. Amazon currently dominates online food and beverage sales, accounting for about 18% of the market, according to Packaged Facts.
"Part of the ‘Amazon effect' is making these [retail] companies start looking into investments in different areas beyond e-commerce," Savanti said. "It forces them to redirect investments to improving their technological capabilities in general--not just at the end of the supply chain, but in the beginning as well."
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