Next time you order that waffle maker or rice cooker, it could be delivered to you by Walmart, even if that’s not where you bought it.
The company said Tuesday that it’s launching a new service that delivers goods sold by other businesses to customers. The service will be ready in time for the holiday shopping season, the busiest stretch of the year for retailers.
Walmart (WMT) said it had struck delivery agreements with national and local businesses, but did not say which ones. It also did not disclose the fees it would charge businesses for deliveries, but said they would be at “competitive pricing.”
Walmart is looking for ways to grow beyond its main retail business and build new revenue streams in areas such as advertising, fulfillment services for merchants on its own online marketplace, and financial technology. Walmart’s new delivery service, called GoLocal, is the latest part of its strategy.
Walmart hopes to give businesses a new option in last mile-delivery, the final leg of an online order’s route to a customer’s home. The company said it will use the network of independent contract drivers on its in-house Spark delivery platform to deliver items from other merchants. Currently, Walmart uses Spark drivers to deliver some online orders from its stores in around 500 cities.
Walmart is betting that it can use its vast footprint around the United States and logistics expertise to offer deliveries, especially in suburban and rural markets that it believes are underserved by parcel carriers and other platforms, said Tom Ward, senior vice president for last mile at Walmart, on a call with reporters Monday.
Indeed, retail experts say the new service may serve businesses struggling with high costs of delivery or fill the coverage voids left by providers like UPS (UPS) and FedEx (FDX).
“The last mile and home delivery space has been a costly offering for almost all retailers,” Tyler Higgins, head of the retail practice at global management consulting firm AArete, said in an email. “The need for improved and efficient delivery is growing and there’s still a gap in the market that [package carriers] can’t meet.”
But Walmart’s competition in the logistics space will be steep as competitors like Target-owned Shipt, DoorDash and Amazon introduce more same-day shipping options.
Last-mile delivery is typically a money-losing venture, and Walmart will need to pull a large number of orders together to make deliveries profitable, say analysts.
This could be challenging to do picking up orders from several different merchants at a time, rather than delivering them from a central location, said Daniel McCarthy, a professor at Emory University’s Goizueta School of Business who studies online delivery companies.
“A big open question will be Walmart getting the economics to work,” McCarthy said. “It will be logistically more cumbersome and thus expensive to manage many small fish instead of a few whales.”