Wal-Mart Teams with Uber, Lyft to Deliver Groceries (WMT)
Get ready to Uber your groceries.
According to reports, retail giant Wal-Mart Corp. (WMT) is partnering with ride-sharing services Uber and Lyft to expedite delivery times for their online grocery service. The move will help the Arkansas-based company counter Amazon.com Inc's (AMZN) Prime Fresh delivery service, which promises same-day "fresh produce and grocery." The service will cost customers between $7 to $10 per delivery or $49 on an annual basis. Wal-Mart is expected to begin test deliveries for the service within the next two weeks in Denver and Phoenix. (Related: Wal-Mart Stock: An Earnings Case Study (WMT)
Uber had earlier started a similar service in 2014. The pilot program, which was available in select neighborhoods in Washington D.C., was called The Corner Store and, subsequently, rebranded as Uber Essentials. However, the San Francisco-based startup shut down the program in January of last year.
According to estimates, consumers spent between $18 billion to $24 billion on online groceries in 2014. That amount is just a fraction of the overall $591.6 billion grocery sales. However, the global share of fresh online grocery is expected to change from 21% to 34% of overall grocery sales this year. (Related: Uber Announces 20% of Global Rides Now on UberPool)
In response, the online grocery space has seen the arrival of a number of players, ranging from established companies and startups alike, angling for a share of the market. For example, Alphabet Inc.'s Google launched Google Express (GOOG) to the growing market even as Instacart, a startup, has partnered with Whole Foods Market (WFM) to ensure delivery.
The main battle in this space is between Wal-Mart and Amazon because they possess the necessary product variety and logistics network to operate at scale in this segment. Amazon charges customers $299 annually for Amazon Prime Fresh, a service that bundles an assortment of entertainment and expedited product delivery options.
Under CEO Doug McMillon, Wal-Mart has instituted a number of changes to its business model to move in lockstep with customer preferences. The company experimented with "express store" models to reach out to millennial customers living in inner cities. However, the model proved unsuccessful and the company was forced to close down 269 such stores. One hundred and fifty four such stores were located in the United States. It also started a curbside grocery pickup and expanded into eight new cities, including Kansas City and Austin. On Thursday, the company announced that it was expanding the service to fourteen new locations.