Walmart has disclosed plans to roll out one-day delivery services to customers in Phoenix, Las Vegas and Southern California with further expansion into 50 major metro cities accounting for 75% of its American customers by the end of 2019. The company hasn’t yet disclosed the cost of this delivery push.
The move is to compete with e-commerce rival Amazon, who has recently invested $800 million during the second quarter for one-day delivery service to Amazon Prime customers. Shares of Walmart plummeted after the announcement.
Since 2017, Walmart had already begun two-day delivery service on orders more than $35, lowering its minimum purchase threshold from $50. On the other hand, Amazon has no minimum threshold to qualify for one-day delivery. However, the service is available for only Prime customers who already pay $119 annually for their membership.
But Walmart has at least one advantage over Amazon - it has a network of thousands of stores across the country functioning as fulfilling centers. That is, the company offers a click-and-collect option by which customers, after placing an order online, can drive to one of these stores to pick up their orders on the same day.
Analysts believe that Walmart’s one-day delivery aspiration is realistic. It would cost the company a manageable $215 million in incremental investments. The company’s one-day delivery service already covers 72% of the U.S. population and ramping it up to 87% will not be difficult.
But retail analysts also believe that focusing on one-day delivery service, from a macro-economic perspective, is not sustainable. Rather, the company should focus on a buy-online-pick-up-in-store option, as it will help save shipping expenses by utilizing their real estate. Surveys reveal that 46% of online shoppers have used the option of pick-up-from-stores and Walmart purchases top the list.