Walmart’s big bet on delivery is finally starting to pay off.
After years of effort and billions of dollars, the retailer is on the verge of being able to deliver to 95% of the US population within three hours, CEO Doug McMillon said during the company’s first-quarter earnings call on Thursday.
That’s faster than Amazon (though Walmart’s selection of products available for such speedy delivery is smaller).
Not only is its delivery reach getting wider, the company handled nearly twice as many three-hour deliveries last quarter as it did a year ago, helping its e-commerce business to post a quarterly profit for the first time.
Overall, Walmart is now handling a lot more packages through its delivery network than it did a few years ago — something that CFO John David Rainey called “densification.”
“Think about the opportunity to deliver a package to five houses on the street versus one house on the street,” Rainey said. “As we grow, we continue to spread those costs over more volume.”
Many Walmart customers are also willing to pay to get their purchases delivered within a few hours, Rainey added. Walmart already offers fast delivery on groceries, for instance, through its Walmart+ paid subscription program. Other shoppers can pay a fee between $7.95 and $9.95 for at least $35 worth of groceries.
Retail tends to be a low-margin business. Turning a profit on delivery can be even more challenging.
But Walmart is starting with something that few competitors have: a sprawling fleet of more than 4,600 stores that are stocked with tens of thousands of items.
From there, Walmart has made further investments over the past several years, including specialized fulfillment centers, remodeled retail stores, and an increasingly automated supply chain to keep inventory flowing.
The company has also built — and redesigned — a suite of apps for customers, workers, and Spark delivery drivers to make ordering and fulfilling more convenient.
More recently, the company has been selling warehousing and delivery muscle to other businesses, as well as a growing (and highly profitable) advertising sales business.
Those revenue streams help Walmart keep delivery speeds fast and costs low while earning money for the company.
All of it adds up to an ever more efficient delivery operation that the company says was able to deliver last-minute bouquets of fresh flowers to customers on Easter and Mother’s Day — and presumably some chocolates too.
“It shows the relevance of convenience,” Rainey said.
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