Score one for a legacy brick-and-mortar retailer. The world's largest retailer added grocery pickup to 30 more U.S. markets during the second quarter, said Walmart CEO Doug McMillon on a pre-recorded earnings call last week. It's now available in more than 60 markets and nearly 400 locations in the U.S. "It's gratifying to see how much this service helps our customers save time," McMillon said.
To use the service, customers place their grocery orders online, choose a time to pick them up and then pull into a designated parking spot when arriving at a Walmart store. From there, a Walmart worker brings the groceries to the person's car.
A source closer to the matter says Walmart will continue to roll-out the service to additional markets. But, it will unlikely do any big marketing to drive awareness for the service right now as it wants it to grow it from a grassroots perspective.
Judging by the metrics and comments from smiling moms with minivans on social media (as seen below), online grocery ordering has been a nice win for Walmart. About 90% of online grocery users are repeat customers, and more than 90% of the orders include fresh grocery items such as dairy, produce and meat, the company toldTheStreet in April.
The chain's research shows diapers and baby products are top-sellers among Millennial moms using the service. The likely reason? They are able to get out of the house with the baby, pop their trunk, and have their diapers and other groceries loaded without unbuckling any car seats or seat belts.
It's time for Amazon to open its wallet in order to be a big player in the grocery space.
Meanwhile, the often hard-charging Amazon continues to move at a snail's pace with the roll-out of its online grocery business as it likely struggles with the economics seeing as it doesn't operate retail stores such as Walmart.
AmazonFresh originally debuted in the company's Seattle home market back in 2007. It delivers groceries straight to a person's house within hours. To access the service, a person needs a Prime Fresh subscription that costs a lofty $299 a year. Order minimums are $50.
In the U.S., AmazonFresh is now available in Seattle, Boston, northern California, southern California, New York metro, northern New Jersey, Philadelphia metro, Stamford, Conn. and Baltimore. Amazon has been mum on its intentions with AmazonFresh, but did give investors something minor to chew on recently. "We have plans with grocery delivery," Amazon's Chief Financial Officer Brian Olsavsky told analysts on a July 28 call.
Amazon didn't return a request for comment on what those plans entail or why it's not moving quicker to expand the reach of AmazonFresh.
"I had assumed it's still in beta so they can figure out what is profitable and what isn't for groceries. They don't want to repeat the Webvan experience of going too big too quickly," explained tech expert and managing director at SpringOwl Asset Management Eric Jackson, a Real Money columnist, as possible reasons for Amazon's hesitance to go after online grocery more forcefully.
Webvan was an online grocery delivery business that went bankrupt in 2001. While the service was popular, the money spent on infrastructure far exceeded sales growth, and the company eventually ran out of cash. While Amazon wouldn't go under from losses like Webvan did as it tries to scale an online grocery business, absorbing such losses would unlikely be welcome by investors.
In the end, the simplest way for Amazon to quickly get scale in online grocery delivery -- and do so profitably -- is to consider buying a supermarket chain that has already dabbled in online delivery.
There is one chain with a health and wellness angle that fits the bill and could probably be had on the cheap due to recent struggles: shares of Austin, Texas-based Whole Foods (WFM) have plunged about 20% over the past two years. Earlier this year, Whole Foods announced an expanded relationship with online grocery delivery firm Instacart, which included a financial investment in the company.
If Amazon is serious about groceries, it would swoop in and eat up Whole Foods and Instacart (and change Instacart's name to AmazonFresh) in one headline-grabbing transaction of well north of $10 billion.
In the meantime, however, it looks as if online grocery is Walmart's market to dominate. Who said operating retail stores was no longer useful in the age of digital?