Wal-Mart banking on grocery pickup

Grocery home shopping tests began for Wal-Mart Stores Inc. in 2011 and have included a mix of delivery and pickup options.

Lessons learned from the testing have convinced Wal-Mart executives that a broader rollout of grocery pickup is a wise course of action. Global e-commerce Chief Operating Officer Michael Bender said Wednesday that the retailer is planning additional implementation of its pickup service across a "wider range of markets."

While Wal-Mart will continue monitoring the service as if it were a test, the retailer has moved out of the testing phase for this particular segment of grocery home shopping. Delivery continues in some markets, but Wal-Mart is banking on pickup resonating with customers and added eight pick-up markets this week.

"Our focus is definitely on pickup right now," Bender said. "We're not turning our backs on delivery. We'll continue to learn in San Jose and Denver. But where we're seeing value from the customer perspective is in the pickup service. We're really trying to listen and have them inform us what is working for them."

Wal-Mart announced additional pickup markets on Tuesday, about two weeks after announcing new pickup locations in Northwest Arkansas. Bender said customers should "stay tuned" for the addition of pickup locations throughout the U.S. Wal-Mart will continue to mix in smaller cities and rural markets into the pickup service.

Pickup services will be offered at a mix of Neighborhood Market and supercenter locations. Northwest Arkansas customers, for example, will soon have a mix of a stand-alone pickup depot in Bentonville, a Supercenter in Rogers and Neighborhood Markets in the region's four largest towns.

Stores with grocery pickup will be staffed with a trained "personal shopper." Bender said the position name was selected so that employees and customers would remember that there was a human element to shopping, even though it's being done online and carried out by someone other than the buyer.

As interest in the service grows, Bender said Wal-Mart could add additional personal shoppers in a given location. Shoppers have traditionally expressed concern about not being able to pick out their own items.

Customers are able to build a list online throughout the week and can schedule orders days in advance. Wal-Mart is depending on technology to help map the routes that its employees take in filling a grocery order.

"People aren't just aimlessly wandering around," Bender said. "We have technology to help us [plan] the steps of the personal shopper. We chose to be intentional because we really want to resonate with customer trust and we understand the responsibility being turned over to us of picking which apple, which piece of broccoli, which banana."

Investors are watching to see what grocery home shopping means for driving additional traffic to stores, Edward Jones analyst Brian Yarbrough said. Retailers must weigh the benefit of adding the service and accompanying expenses to the bottom line when margins are already low in grocery.

Improving traffic in stores has been a focus for the retailer as it looks to boost sales. During the first quarter Wal-Mart reported a 1.5 percent increase in foot traffic last quarter and a 1.3 percent increase in same-store sales.

"Wal-Mart put groceries into the store to drive traffic," Yarbrough said. "The hope is that when customers are in the store for groceries, they'll pick up other things as well. You aren't really getting that with pickup. So you have to ask how it will drive new customers."

More than 70 percent of customers surveyed recently by Fayetteville-based retail research firm Field Agent expressed interest in grocery home shopping. Although only about 20 percent of the 500 consumers studied had used pickup or delivery before, 71 percent said they would like to use that sort of service in the future.

Field Agent, through its "Grocery 2.0 survey" described the grocery and convenience item market as high as $1 trillion.

Bender said the service could save shoppers between two and three hours a week. With 4,500 stores in the U.S., about two-thirds of the nation's population within five miles of a Wal-Mart.

How many of those stores will be designated as pick-up sites for grocery is unclear. Bender would only say "more are coming" and noted Wal-Mart continues to look for ways to integrate its digital and physical assets.

"Grocery shopping can be a long process," Bender said. "What we've done is taken that time away and given it back to them to do other things. We have a significant footprint with 4,500 stores and that allows us to do unique things. It's a powerful combination, one that no one else can replicate. We're learning that our customer expectations continue to rise. Our goal is to engage them in anyway that we can."

Business on 10/01/2015

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