Amazon might be the clear winner in delivery but Walmart is the leader in grocery pickup, with more than 3,000 stores set to offer the free service by the end of this year. According to a recent report from Cowen and Company, between 11% and 13% of Walmart customers use curbside service, and by next year it will account for 33% of Walmart's digital sales.
Walmart's grocery pickup has unsettled competitors and burnished the retailer's digital credentials. But as recent data shows, the true value of its pickup service may be the ability to reach convenience-focused, digitally-savvy shoppers and bring them deeper into Walmart's ecosystem.
According to customer data from market intelligence firm Numerator, Walmart's grocery pickup baskets are much larger than in-store shoppers' baskets. The average spend per trip for grocery pickup is $124.86 while in-store is $49.70. And that spending increases the more customers use the service, with average spend climbing more than $10 between customers' first trip and when they've made 12 or more trips.
The data also shows that consumers prefer Walmart's pickup service to in-store shopping. Thirty-nine percent of Walmart's grocery pickup shoppers want a quick in-and-out trip and 45% think grocery shopping is a chore. In addition, 76% found they save time shopping online and 64% found it enjoyable.
Consumers are using pickup to buy more than just groceries but also health, beauty and household items, which make up more than 50% of pickup trips. Numerator also found that most grocery pickup shoppers, in general, are affluent, busy, young professionals often with children.
"These shoppers are willing to spend more using Grocery Pickup and tend to be more loyal to Walmart among other grocery pickup services," the firm wrote in a note emailed to Grocery Dive.
The benefits of free
Walmart's grocery pickup service has proven to be a very effective tool for bringing in new customers — including those who might have previously avoided the bargain retailer because they felt stores were crowded and difficult to navigate, according to Carol Spieckerman, president of Spieckerman Retail. Between 40% and 60% of curbside sales come from new Walmart shoppers, according to Cowen and Company.
Offering the service without an additional fee makes adoption easy for shoppers to try, Spieckerman said. And it makes Walmart unique among grocery competitors, including Kroger, which charges $4.95 per order.
According to Keith Anderson, senior vice president with Profitero, Walmart's scale and customer volume give it the ability to offer free pickup. Other grocers, he said, haven't been able to make the economics work yet to waive the charge.
"Your most loyal shoppers will continue to shop, but it may not attract new shoppers as Walmart’s does," Anderson told Grocery Dive.
To boost awareness, Walmart has heavily publicized its pickup service. According to Numerator, last May the retailer sent out a digital coupon in the majority of its circulars for $10 off customers' first grocery pickup order. By June and July, the amount was increased to $10 off shoppers' first three orders.
The retailer also dedicated 40% of all of its ad spending to promoting online ordering over the past year. This included a $31 million Super Bowl ad in January for grocery pickup featuring famous cars from popular movies, including Transformers and Back to the Future.
These ads and promotions may have contributed to the uptick in Walmart’s grocery pickup users, but Spieckerman says word of mouth among customers also plays a big role.
“If customers don’t know about it, then it doesn’t get adopted,” she said.
Numerator added in its note, “A majority of Walmart’s Online Grocery Pickup users are not just users, but advocates, which projects positively for Walmart in the long-term. Cultivating more advocates by delivering a consistently positive pick-up experience, while continuing to expand the service to more store locations, should position Walmart well in the omnichannel grocery arena.”
Keeping competitors on their toes
The influx of consumers adopting grocery pickup from Walmart shows the retailer’s strength as it juggles many different e-commerce initiatives, including same-day delivery, which will be available at 1,600 locations by the end of this year.
Walmart also announced it will roll out one-day shipping, which is free with orders over $35 and comes shortly after online rival Amazon said it would offer one-day shipping for Prime members.
But curbside pickup may be Walmart's biggest advantage in the e-commerce wars, Anderson said. Amazon, for one, only offers the service from Whole Foods stores in 30 markets and from two Amazon Fresh Pickup depots in its hometown of Seattle. Numerator's data shows Walmart is actually poaching some of those Prime customers, with 65% of those Walmart grocery pickup customers surveyed noting they are also Prime members.
“I don’t think either one of them is necessarily better than the other, but as time goes it's getting clear to me that (Walmart) is going to do things differently than Amazon,” Anderson said.
Other grocers are steadily growing their own pickup services. Kroger Grocery Pickup is available at more than 1,000 stores while Albertsons Drive Up & Go service now operates out of more than 500 locations. Target's Drive Up curbside service has expanded rapidly and is now at 1,250 locations nationwide.
Instacart, meanwhile, has boosted store pickup to 25 retailers in 30 states since it began offering the service nationwide late last year. Retail partners include Publix, Food Lion and Sprouts Farmers Markets. By the end of the summer, 90% of Wegmans stores will offer pickup through the e-commerce provider.
According to eMarketer, the number of store locations that offer pickup services across the grocery industry nearly doubled last year. This means Walmart's first-mover advantage may be short-lived, putting the onus on the retailer offer new perks and deepen its relationships with the many new customers it's gained.
“Just about anything Walmart decides to do, always checks several boxes," said Spieckerman. "They rarely do anything that serves a single purpose or accomplishes a single goal and grocery pickup is no exception."