Wal-Mart Stores Inc. is testing a new delivery service that uses its own employees to drop off packages to customers for extra pay at the end of their store shifts.
The pilot program, which was introduced Thursday as part of the retailer's shareholders week, continues Wal-Mart's efforts to take advantage of its size and scale to gain an edge against retail competitors such as Amazon.com.
Company officials said the delivery service, which began a month ago and is voluntary for employees, is being tested at one unspecified Northwest Arkansas store and two New Jersey locations.
Employees who have volunteered to participate in the program are armed with a mobile application, which was built by the company and designates where they're heading after their work shifts end. The app then identifies Walmart.com and Jet.com packages that can be delivered along the route. Wal-Mart said employees can choose which days they want to deliver items, the number of packages they want to drop off and the size of the items they'll take with them.
"You can imagine hundreds of associates who live all around in different neighborhoods around the Wal-Mart," said Marc Lore, who is the company's U.S. e-commerce chief. "We take the packages and say, 'OK, this associate lives over here and they're going to drive this way all along the route.' So the distance is pretty short that they need to go off their commute."
Wal-Mart declined to specify how much employees will be compensated for delivering packages, but a spokesman said the company is complying with minimum wage and overtime laws.
Officials believe the service will speed up the delivery time on items and help cut costs by utilizing its 4,700 stores and 1.5 million employees. The company said 90 percent of the country's population lives within 10 miles of a Wal-Mart store.
So far, the retailer said it has delivered hundreds of items as part of the three-store test the past month, and many of those have been dropped off at doorsteps within a day of being ordered.
"You can imagine the future possibilities once this network is built out," Lore said, projecting that a successful pilot program could lead to an expansion of services to areas like fresh groceries or same-day delivery.
The e-commerce initiative is the latest to be introduced since Lore joined the company as part of Wal-Mart's $3.3 billion acquisition of Jet.com last August.
Wal-Mart previously announced plans to offer free two-day shipping on orders of at least $35 earlier this year. The company has recently started offering discounts to customers on products they order online and pick up in stores. The initiatives helped Wal-Mart's e-commerce sales increase 63 percent in the first quarter of the fiscal year.
Annibal Sodero, an associate professor at the University of Arkansas' Sam M. Walton College of Business, said searching for solutions to curb last-mile delivery costs aren't new for the company.
Wal-Mart has experimented with different options the past few years, according to Sodero. Wal-Mart announced during last year's shareholders meeting that it was partnering with ride-sharing services Uber and Lyft on grocery deliveries as part of a pilot program. The grocery delivery tests are ongoing, according to a Wal-Mart spokesman.
"The key here is the final mile delivery cost," Sodero said. "Final mile delivery in e-commerce may account to up to 30 percent of the total logistics costs, being by far the largest component of the total logistics costs. This is just another attempt of Wal-Mart at lowering those costs."
Wal-Mart also said it is taking precautionary actions to ensure its employees are vetted before delivering packages to customers. Those who volunteer for the program must submit to a background check and must have a clean driving record.
Customers won't know when they order an item whether an employee will be delivering the product or one of the retailer's other last-mile partners like UPS or FedEx. Employees will wear their Wal-Mart vests when delivering to a home and will ask for a signature if the customer answers the door. If not, the package will be left on the doorstep.
Carol Spieckerman, a retail consultant and president of Spieckerman Retail, said training will be important for those employees because they'll serve as the "face" of the company with customers who may not regularly shop at Wal-Mart stores.
"This marks yet another way that Wal-Mart is creatively leveraging its physical scale, both in terms of store locations and their proximity to consumers, and Wal-Mart's army of associates," Spieckerman said.
"It makes nothing but sense as Wal-Mart will be using existing associates already on its payroll, providing an incremental income for associates who opt into the program and a bit of an insurance policy for Wal-Mart in terms of security. Existing employees will have an incentive to keep things on the up and up and to work efficiently in order to stay in good standing."
Business on 06/02/2017