Walmart discovers why the ‘last mile’ is the hardest

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A Walmart worker standing in the toy aisle organises products for the Christmas season at a Walmart store in Teterboro, New Jersey. Reuters

EAST BRUNSWICK (Reuters) – Standing before an audience of 14,000 people last year, Walmart Inc executives described a radical plan to help it fend off Amazon.com Inc and other online delivery services from stealing its customers.

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Walmart’s own store employees would bring online orders directly to shoppers’ homes after completing their usual shifts of up to nine hours on the sales floors. Aiming to lower the retailer’s shipping costs by tapping its massive workforce, the programme was part of a multi-pronged strategy to boost its $11.5 billion US ecommerce business and tackle one of the biggest challenges in retail: the so-called “last mile” of delivering goods to online customers.

Its workers, meanwhile, could earn extra money on top of their hourly pay, which starts at $11 an hour.

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“Just imagine associates all over the world delivering orders to customers on their way home,” Marc Lore, head of Walmart’s e-commerce operations, said at its annual meeting in June 2017. “That can be a real game-changer.”

But months later, Walmart quietly retreated from its original vision for the pilot program – launched in New Jersey and Arkansas – and ended it altogether in January, according to company documents obtained by Reuters and interviews with more than two dozen Walmart employees.

The story behind the foundering employee delivery initiative, which has not been reported, offers insight into Walmart’s ongoing attempts to find unconventional ways to close the gap with Amazon in the game of cheap, rapid, doorstep delivery of packages. According to Walmart data, people who shop in stores and become online customers spend nearly twice as much as those who shop at one or the other.

Here in New Jersey, Walmart started the programme with the idea that store employees could courier all items that would fit in a car. But the initiative failed to gain traction with sceptical employees who had to use their time after work, according to sixteen workers who participated in the trial.

Walmart is now testing a more modest service with just four Walmart employees who deliver goods from a single store in Woodstock, Georgia, Reuters has learned. In this latest initiative, Walmart is also overhauling the guidelines for employees and limiting deliveries to groceries and related items such as paper plates.

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Walmart spokeswoman Molly Blakeman confirmed that the retailer ended its first experiment early this year, without elaborating. Walmart is testing a variety of ways to deliver merchandise, she said, and is “encouraged by what we’re seeing” in the Georgia store.

Despite having 4,700 US stores within 10 miles (16 km) of 90 percent of the US population, Walmart is still trying to figure out how to efficiently make deliveries and has poured billions of dollars into ecommerce in recent years.

But as recently as the last holiday season, its online sales disappointed some investors.

Walmart caters to US online shoppers by having them drive up to their local store themselves to collect merchandise they ordered online. It also partners with shippers such as FedEx Corp, the United States Postal Service (USPS) for routine deliveries.

Still, Walmart aims to be able to deliver groceries to more than 40 percent of households in the country by the end of this year. Globally, Walmart is experimenting with deliveries by motorbike in Mexico and with new small supermarkets in China to make deliveries in 30 minutes or less. In Japan, Walmart is opening a new warehouse to support orders, and expanding its online offerings to include meal kits.

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Earlier this year, Reuters reported the retailer’s delivery partnerships with Uber and Lyft ended after the ride-hailing services struggled to deliver people and packages together. It continues to rely on third-party companies such as Postmates, Deliv and Doordash to help deliver groceries, and last week partnered with Alphabet Inc’s Waymo.

Walmart’s associate delivery pilot program in the leafy, middle-class suburb of East Brunswick, New Jersey, started with store managers pitching employees an unusual new way to boost pay. Those who passed background checks could moonlight as drivers for the Walmart.com delivery service, they said.

Some staffers, who did not wish to be named fearing retribution for speaking to the media, told Reuters they balked at having to use their own cars and personal insurance policies for a programme that would benefit Walmart.

To entice them to sign up, Walmart offered free TVs and iPads as gifts, they said. Eventually, about 50 of the store’s more than 150 associates initially signed up, they added, though many had no prior experience as couriers with a delivery service.

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