Walmart's wild new plan to win in e-commerce: Have employees deliver packages on their way home

By Caroline Fairchild and Chip Cutter ?

Walmart wants its 1.5 million associates around the country to start making deliveries to customers on their way home from work, the retailer announced on Thursday.

In an attempt to better compete with Amazon on online orders, Walmart is aiming to leverage its locations across the country to get deliveries to customers faster. Some 90% of the U.S. population lives within ten miles of a Walmart. If frontline workers take deliveries to customers on their way home from work, Walmart can bolster its online business, spokesperson Ravi Jariwala said.

“Walmart is uniquely qualified to offer this,” he said. “If you think about the routes that [employees] take after work, you suddenly you realize you are creating a very dense last-mile web.”

The announcement came during the second day of the retail giant’s annual meeting in Bentonville, Ark. The event brings together 14,000 employees and investors to northwest Arkansas for a series of executive panels, celebrity cameos and surprise concerts.

The delivery concept is still very much in a pilot phase and has been tested in three stores in New Jersey and Arkansas over the past four weeks. Walmart employees can elect to participate in the new delivery business — or not — and can decide what days they want to make deliveries and the size of the orders they will bring to customers. It is too soon to make any predictions on how this could potentially increase the earnings of Walmart associates, who on average make $13.69 an hour, or about $25,000 a year. Jariwala declined to give specifics on employee pay, but said so far employees have been pleased with the program.

In tests, most online orders are being delivered the next day, sooner than the promised two-day delivery.

“Associates love having the option to earn more cash while doing something that’s already part of their daily routine,” Walmart’s CEO of global e-commerce Marc Lore wrote in a blog post about the announcement. “An unexpected benefit is that they’re finding quicker routes home thanks to the GPS built into our proprietary app.”

Consumers won’t be notified that a Walmart employee is delivering the packages. Jariwala said that this new program is “quite invisible from a customer experience standpoint.” Employees must undergo background checks and a vehicle inspection before participating.

Most deliveries will take place during the day or early evening hours. Walmart said it will not allow employees to leave their shifts early to make these deliveries.

The company built an app so employees can set detailed preferences, such as the number of days they’ll work and the weight of packages they will accept. A routing algorithm is meant to take employees on the most efficient route home while also allowing them to make the delivery stops.

The effort came together in a “couple of months,” Jariwala said, a sign of Walmart’s increasingly aggressive battle to take on Amazon and improve its e-commerce business.

Last month, Walmart announced that online sales grew a surprising 63% in the first fiscal quarter of the year. Jet.com – Lore’s e-commerce startup – was acquired by Walmart in August for $3 billion. As part of the deal, Lore agreed to stay on as head of Walmart’s then struggling e-commerce operation. While Jet.com remains Walmart’s biggest e-commerce acquisition to date by a long shot, the nation’s largest employer has also recently purchased ModCloth, ShoeBuy and Moosejaw to bolster its e-commerce offerings. In total, Lore has spent roughly $200 million buying startups in the space since he joined.

Another big way that Lore has influenced Walmart’s business is in its newfound focus on in-store pickup. In April, the retailer announced that U.S. shoppers would get a discount on more than 10,000 online items if they agreed to pick them up in one of Walmart’s 4,692 locations. As U.S president and CEO Greg Foran said in a speech Wednesday, giving consumers an easier way to buy online by picking up in stores is something that Walmart considers to be a competitive advantage.

"If we are really, really good at that, that's probably the single biggest advantage we're going to have,” Foran said.

Lore has not been shy in the past that all of these efforts are in large part to compete against the big orange and black elephant in the room: Amazon. In 2016, 43% of all U.S. online retail sales went through Amazon. Online sales grew roughly 15% last year in the U.S., but still accounts for just 8% of total retail sales. Lore, formerly the founder of online retail startup Quidsi, worked for Amazon for roughly three years after the online behemoth acquired his company in 2010 for $545 million.

In an article last month on Linkedin, Lore wrote that selling to Walmart last year wasn’t a hard decision. In his mind, partnering with the retailer would allow him to get toward his goal sooner.

But what’s Lore’s goal, exactly? Beating Amazon likely has something to do with it.

“When we joined Walmart, we didn’t sell out,” he wrote. “Instead, we increased the probability and speed with which we could reach the outcome we described at the beginning of our venture.”