Why Walmart is sidestepping Instacart

Walmart is partnering with DoorDash and Postmates on grocery delivery for one very big reason.

According to Record, Walmart discussions with Instacart have hit an impasse because Instacart wants Walmart to list its grocery items for sale on Instacart’s app, while Walmart simply wants to use Instacart delivery people to fulfill orders that flow exclusively through Walmart’s own digital properties.

According to Recode, the arrangement preferred by Walmart would likely limit the financial upside for Instacart, which typically brings in revenue through commissions from grocers in exchange for generating new customer demand, in addition to delivery and service fees it charges customers who place orders through the Instacart app. If Instacart were to simply act as a delivery network for Walmart orders, it would have limited ways to make money.

This week DoorDash and Walmart announced it will broaden their work together in more markets in the coming months as the retailer expands to reach more than 40 percent of U.S. households with delivery by the end of the year.

“We’re connecting all the parts of our business to create a shopping experience like no one else can. With the expansion of our Online Grocery Delivery program, customers can have great items at every day low prices delivered to their door with the click of a button,” said Greg Foran, president and CEO, Walmart U.S. “With the help of DoorDash, we’re delivering the best of Walmart to customers in Atlanta and beyond.”

Walmart is also running a similar program with Postmates as it looks to get further into grocery delivery.

DoorDash, along with Walmart’s team of more than 18,000 personal shoppers, will bring delivery to thousands of customers in Atlanta allowing them to shop for and have fresh groceries without ever leaving their couch. Personal shoppers must complete a three-week training program learning how to select the freshest produce and the best cuts of meat for Online Grocery customers.

According to data Mercatus collected in 2016, 62% of shoppers would be interested in home-delivery of groceries with 91% willing to pay between $1-15 for this service, well in line with Walmart’s $9.55 fee. Levels of interest and adoption will only continue to increase as major grocery stores like Walmart continue to lower the barrier for entry and shoppers recognize the possibilities for great service and convenience.

Walmart Grocery Delivery brings customers the convenience of shopping when and where they want for quality, fresh produce, meat, seafood and bakery items, along with pantry staples, consumables and seasonal general merchandise. To use delivery, customers in Atlanta place their orders online at Walmart.com/grocery or on the existing Walmart Grocery App, switch to the Delivery tab, and select a delivery window at checkout. After orders have been picked by Walmart’s personal shoppers, a DoorDash “Dasher” retrieves the order from a Walmart store and delivers it right to the customer during their specified delivery window.

Groceries can be delivered to customers as soon as the same day. Walmart’s Online Grocery Delivery carries a simple $9.95 fee and a $30 minimum order - no subscription, no price markups. Customers can get their first order delivered for free with promo code FRESHCAR with a $50 minimum order.

The retailer also offers an Online Grocery Pickup service that allows customers to order their groceries online and pick them up in stores without ever getting out of their cars. The service, which has become a customer favorite and touted as a “Grocery Hero” for moms on the go and time-strapped families, is now available in 1,200 stores, nearly 30 in Atlanta, with 1,000 more to be added this year.

"In the midst of all the delivery service announcements, what’s not getting attention is that consumers also have a strong interest in using click and collect. Setting up a click and collect option can be more time consuming and requires further investment. However, this is offset by strong shopper preference for a pick-up option. The same Mercatus research shows over 50% of grocery shoppers are interested in having in-store pick-up. Almost two-thirds of shoppers would pay $10 or less for this convenience, which would offset the initial expense with the added benefit of getting customers into the store,” said Sylvain Perrier, president and CEO, Mercatus.