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Walmart Heats Up War With Amazon: How Are Others Placed?

Zacks

Walmart Inc.’s WMT latest contract with Postmates is likely to intensify the online grocery delivery competition among retailers — which was largely triggered by Amazon’s AMZN takeover of Whole Foods Market last year. Ever since the e-commerce biggie’s intrusion into the grocery space, retailers, particularly Walmart, have been making constant attempts to stay firm in the game.

From speedy deliveries to payment systems, from selling grocery to offering meal-kits online, both Walmart and Amazon have been in a constant contest against each other for quite some time now. Well, Walmart improved its flair in the race yesterday, when it inked a deal with Postmates to extend its online grocery delivery service, with an intent to cover more than 40% of the families in the United States.

Walmart Playing New Card Every Day

Walmart initiated the aforementioned online grocery delivery service in Charlotte, NC, and now intends to expand it further in the coming months. This service will enable Walmart to provide same day delivery to customers, who can place orders on the grocery section of the company’s website or use the Walmart Grocery app. Thereafter, any Postmates member will procure the order and carry out the delivery process seamlessly. With an order fee of about $9.95 on a minimum order of $30, this service appears to be much viable than others like Shipt which mandates a membership program.

Without a doubt, the service will enhance customers’ experience, as they can now order products including fresh produce, bakery items, meat, seafood and pantry staples among others more conveniently. However, the move is not completely unexpected. Last month itself, this big box retailer announced plans to expand online grocery delivery services to more than 100 metros in the United Sates, in a drive to reach nearly 40% of the nation’s household this year. While Walmart has been resorting to partnerships and buyouts to offer grocery deliveries, the company has its own Online Grocery Pickup service which is also popular as “Grocery Hero” among customers. Walmart’s Pickup service enables customers to order online and pick up orders from stores – a service that can be currently availed across 1,200 Walmart stores with plans of spreading to 1,000 more stores this year.

In fact, there were rounds a day ago about Walmart’s stride to expand pickup tower facilities to additional brick-and-mortar stores. The company plans to install giant pick-up kiosks in 500 additional stores by the end of 2018, which will lead to the availability of such services in 700 stores. The new towers will be equipped with extra features such as pickup lockers. Also, to ease payment, Walmart announced plans to launch “Walmart2World” money transfer service in collaboration with MoneyGram International MGI earlier in the month.

Talking of the past alliances and buyouts mentioned above, the company tested same day deliveries with Deliv, while it also partnered with ride-hailing services like Uber and Lyft for speedy online grocery deliveries. Moreover, the company acquired delivery startup Parcel, Inc., which specializes in same-day delivery for perishable and non-perishable products.

Amazon Incites Stiff Competition

Granted, Walmart, which generates a chunk of revenues from food sales, has been taking perfervid initiatives in the delivery services realm to counter Amazon’s growing dominance. And it ought to, given the online king’s quest to dominate any sphere it touches. Though Amazon has its eyes on Walmart’s other areas of interests too (like expanding in the healthcare space) let’s maintain focus on online grocery.

Incidentally, Amazon has been trying to exploit nook and cranny of the online grocery delivery space, easily evident from its recently initiated free two-hour delivery of Whole Foods products to Prime customers in Los Angeles. Apart from this, the Zacks Rank #1 (Strong Buy) company also lures customers with Amazon Lockers, which is a parcel delivery service, wherein customers can select locker locations as their delivery address and pick up orders.

Well, Amazon could only do this by leveraging stores of Whole Foods, which was scooped up last year. Ever since, the dot.com giant has been dedicatedly integrating Whole Foods into its Prime operations and exploiting it strategically to attract customers and enrich their experience. Consequently, other players like Kroger KR and Target TGT have also been pulling up their socks to stay in the game.

Target, for instance, is deploying resources to enhance omni-channel capacities and expanding same-day delivery options. To this end, the company has undertaken rationalization of supply chain with same-day delivery of in-store purchases for a flat fee along with technology and process improvements. Further, this Zacks Rank #3 (Hold) company acquired Shipt to expand same-day delivery — an announcement that followed plans to initiate same-day delivery in New England, Philadelphia, Washington, DC and Baltimore for more than 55,000 groceries, essentials, home, electronics, toys and other products. Apart from this, the company’s Target Restock program and Drive Up service deserve mention, when talking about its efforts to join the online delivery bandwagon.

Moving to Kroger, the company’s the company’s “Restock Kroger” program is gaining traction. Also, the Cincinnati-based retailer’s agreement with Instacart for same day deliveries, and ClickList order online and pick up in store services tell the tale of its efforts to stay afloat in the online grocery space. Moreover, the Zacks Rank #3 company tried Uber’s services to facilitate deliveries — a card also played by Walmart.

Can Walmart Stay Firm in the Game?

That said, it looks like competition among these grocery retailers is far from subsiding. Owing to the mounting competition, price wars, aggressive promotions and falling store traffic have been some major concerns plaguing companies in the Retail-Wholesale sector, that is currently ranked among the bottom 31% of all Zacks sectors. Nevertheless, retailers’ relentless efforts to evolve with the changing trends and attract customers to drive top line has helped the sector surge 23.9% in a year’s time, comfortable outdoing the S&P 500’s rise of 15.5%.

Though most grocery players are strongly focused on going a step ahead of the other, we remain hopeful about Walmart’s ability to withstand this competitive frenzy. This can be solely attributable to its steadfast focus on solidifying its game against Amazon, which is most evident from its recent emergence as an omni-channel retailer officially. In fact, these endeavors have also helped this Zacks Rank #3 stock rally 20.6% in a year, surpassing the industry’s 15.7% gain. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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