Dive Brief:

• Walmart is using grocery pickup as a way to marry its e-commerce business with its large network of stores and gain an edge over Amazon, according to The New York Times. The retailer began ramping up its Grocery Pickup service two years ago and it is now available in about 1,000 stores.
• While some retailers such as Amazon and FreshDirect are betting on a home delivery model, Walmart instead is focusing on capturing millions of Americans in suburban and rural areas who drive everywhere by offering an easy grocery “drive-through” click-and-collect service.
• The risk is that click-and-collect will prevent shoppers from going into the store to buy the retailer’s bigger-ticket general merchandise items. “That is the philosophy of the Supercenter: You put all these other categories under one roof. If the customers don’t go into the stores, that could be a negative,” Gene German, a professor emeritus of food marketing at Cornell University, told The New York Times. 

Dive Insight:

It’s been widely reported that two-thirds of American households are located within five miles of a Walmart store. With an enormous amount of capital sunk into 4,600+ brick-and mortar locations, a Walmart strategy that leverages physical assets to build out Grocery Pickup click-and-collect is a solid one.

The good news is that analysts generally agree that click-and-collect (vs. home delivery) will emerge as the dominant and more economically sound online grocery format across America. This means most shoppers will still be visiting stores to collect their goods. Forty-nine percent of Americans tried click-and-collect for the first time last year, and the number of repeat customers is growing.

Plus, to the benefit of retailers, IRI research has found 69% of shoppers who go in-store to pick up their orders end up buying additional items. And people who shop via different methods — including online, mobile and visits to a physical store — spend more than double those who only shop at brick-and-mortar, according to a Deloitte study on omnichannel shopping.

These kinds of statistics are compelling and create a huge opportunity to drive click-and-collect shoppers into stores. So the trick becomes figuring out how to apply some marketing prowess — for example, offering special deals, discounts or digital offers — to entice online shoppers into the store to browse, and hopefully buy additional higher-margin goods such as general merchandise and health and beauty.

The company’s aggressive Walmart Grocery click-and-collect rollout is on track to be in 1,100 stores by year’s end and eventually in all of its outlets. Earlier this year, Walmart started piloting an employee delivery program that paid associates for shuttling orders to customers’ homes. The retailer also has been testing automated kiosks where shoppers can grab their online orders any time of day without the assistance of a store associate.

In what’s viewed as a close competitor to Amazon’s Dash Buttons, Walmart filed a patent for technology that would track consumers’ usage of everything from toothpaste to shoes, automatically place reorders and allow consumers to order branded products at the push of a button. To challenge Amazon’s Alexa, Walmart is now partnering with Google to bring voice-assisted shopping to its customers using Google Home. Most recently, the retailer began testing a new service that would deliver food products inside customers' homes and refrigerators even when they are not home.

So while it’s unlikely Walmart will upend Amazon’s online dominance, the retail giant certainly doesn’t intend to budge when it comes to grocery. After all, the retailer is America’s largest grocer and intends to stay that way. And there’s mounting evidence that grocery is driving e-commerce success at Walmart.

During its Q2 earnings call in August, the company said its grocery pickup service was showing “strong results.” New research by Slice Intelligence substantiates that claim, showing that Walmart.com, Walmart Grocery and Sam’s Club e-commerce sales combined grew 73% year-over-year in the second quarter of 2017 and that grocery composed more than a quarter of Walmart’s U.S. e-commerce sales during the period. Walmart clearly looks to be on course to grab a higher stake of the high-growth online grocery market.