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On Tuesday, Walmart will begin offering overnight delivery services to Phoenix and Las Vegas. The company also announced plans to expand its operations in Southern California in the coming days.
More than 220,000 items, including pet food, diapers, paper towels and laundry detergent, will qualify for this service. Customers must spend at least $ 35 to receive shipping the next day.
The biggest retailer in the country has big ambitions for faster shipping to save time. He plans to launch the next day delivery to reach 75% of the United States this year.
It's no surprise that Walmart does the same.
"Customers are waiting for an expedition in the day," said Laura Kennedy, an analyst at Kantar.
Walmart thinks it can solve this problem with its vast infrastructure of execution. On Tuesday, the company said it could control costs by combining various options: online fulfillment centers, 4,700 stores in the United States, and other order processing centers offering products to stores.
Kennedy predicted that the Walmart movement could encourage more rivals to do the same.
Catering for busy families
One-day delivery marks an evolution of Walmart's online strategy. Previously, it offered a free two-day delivery for orders over $ 35, same-day delivery and same-day in-store pickup for online orders.
In-store pickup, in particular, took off with buyers. UBS analysts estimate that up to 60% of Walmart's online business comes from online grocery shopping.
Walmart's new next-day delivery option will bring extra convenience to busy customers who do not have the time to shop or order, "said Walmart's new Customer Manager Janey Whiteside. She is the first person to have the job.
Customers are demanding more and more simple ways to shop, she told CNN Business: "Sometimes you just need it tomorrow."
Walmart wants to reinforce the loyalty that it already has among existing customers with overnight delivery. Whiteside added that the company also hopes to attract new customers.
High costs
Convenience has a cost. Online delivery is more expensive for retailers than in-store purchases because they have to pay shipping costs.
According to estimates by UBS analysts, Walmart will have to invest $ 215 million in its business to offer a one – day shipment to the United States. This money will reduce Walmart's profit margins by 0.5% a year, analysts said.
Walmart challenges these numbers. The company says it will be cheaper to deliver orders the next day because it will use the nearest run option from customers to ship the items and use a box to deliver them.
This strategy differs from the way Walmart handles its two-day deliveries for millions of eligible items. For these orders, Walmart often ships items in multiple boxes and uses distribution centers that are often far away from customers' homes. Walmart often has to pay expensive shipping fees for these purchases.
Walmart will limit the number of items it may offer customers for a one-day expedition, depending on the options available, to the extent possible, for the closest attainment. Walmart plans to limit overnight delivery costs by tailoring the products to the needs of the local market. In Phoenix, for example, distribution centers near Walmart will be wearing sunscreen all year round. But in Michigan, sunscreen will be primarily available for overnight delivery in the summer.
To avoid shipping costs over long distances, Walmart must ensure that the right items are in stock at its nearest customer order centers.
Rival Target, meanwhile, is working on its own strategy. This retailer is already offering overnight delivery for basic household items orders in excess of $ 35 through a program called Restock. But these orders carry a $ 2.99 fee.
The company also offers same-day delivery via its Shipt service in 1,500 Target stores. But Shipt requires an annual fee of $ 99.
Target has attempted to limit online shipping costs by using its stores as distribution centers for online orders. The stores achieved nearly three quarters of Target's digital sales during its last quarter.
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