Walmart is testing a delivery subscription as it ramps up its grocery e-commerce business

It’s the latest in a string of additions to Walmart delivery options. Earlier this month, the company announced the upcoming rollout of InHome Delivery, which, similar to AmazonKey, lets delivery drivers drop off grocery orders in customers’ homes and unload cold products into their fridges. Right now, the service is being tested with 1 million customers in select cities before a broader expansion in the fall.

While Walmart expands services, it’s targeting grocery delivery as a category it can excel in — with its store reach, it’s closer to customers than Amazon and has a more robust grocery business than competitors like Target. Other retailers have used external services like Instacart to compete in e-commerce and delivery options, but Walmart’s built its own services as an ongoing investment in online-offline capabilities and has worked with a variety of delivery partners to get items to customers faster, including Skipcart, Postmates and DoorDash. CEO Doug McMillon said earlier this year to investors that building out delivery services was a long-game investment in terms of profitability. Adding a subscription service is a play for customer loyalty and repeat purchases, especially at a moment where online grocery delivery services are splintered.

“Digital grocery remains a confusing space for shoppers — Amazon itself has four different ways of getting consumer packaged goods to customers,” Bill Duffy, research director for Gartner L2, told Digiday in a recent interview. “Particularly on the website, they make it pretty clear that customers can get grocery pickup for free, and are educating customers on the fulfillment option and how they can get it.”

In the last quarter, Walmart’s e-commerce sales were up 37%, a jump McMillon attributed in part to the growth of its online grocery business. An April analysis from Cowen and Company reported that between 11% and 13% of Walmart customers currently use its grocery pickup and delivery services.

Delivery wars, and getting items to customers as fast as possible while offering them as many options to pick up online orders or have them delivered, are heating up across big-box retailers. In May, Walmart announced it would be going toe-to-toe with Amazon and rolling out free next-day delivery, just after Amazon said it would be narrowing its Prime shipping window from two days to one. Walmart said that 200,000 items online would be available for next-day delivery. Target has made its store network the cornerstone of its e-commerce delivery and pick up strategy, and recently expanded the options for its Shipt same-day delivery service. Customers can either pay $99 a year for same-day delivery through a Shipt membership, or pay a one-off $10 fee on Target.com. That adds onto Target’s other capabilities for order pick up and delivery, including ship from store, buy online, pick up in store and curbside pickup.

“For retailers today, fulfillment is the fourth leg of the stool in terms of competitive strategies, in addition to brand, price and assortment,” said Omar Akilah, vp of product management at supply chain service Yantriks, who formerly was the director of product management at Target. “There’s no reason that Target or Walmart can’t compete with Amazon Prime if they use their stores to their advantage.”

As Walmart tests new delivery services like InHome and Delivery Unlimited, it’s also streamlining its internal e-commerce business. Last week, the company announced a reorganization of Jet.com: The e-commerce marketplace is being integrated into Walmart’s teams in departments like technology, merchandising, marketing and product, a move that eliminates internal silos across arms of the business that are moving towards similar operational initiatives, around capabilities like fast shipping. Siloed, separated e-commerce experiences is a disadvantage at a time when retailers are most benefiting from internal consolidation and operational streamlining.

“Traditionally, you have brick-and-mortar stores and fulfillment centers. What Target and Walmart have done is broken down the barriers between the two,” said Akilah. “Basically putting inventory closest to the customer by leveraging assets — that’s gold.”

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