Why home delivery could work for Walmart

Walmart may be the nation’s largest grocer, but it’s not because of the compelling presentation of fresh produce or appetizing meats. The stuff is cheap, sure, but the quality isn’t always there, and even when it is, the manner in which products are packaged and merchandised detracts from quality perception. Then there are the issues that arise with so many shoppers, not to mention their unattended kids, pawing through displays of tomatoes, bell peppers and grapes. Items get bruised, or roll on the floor and get run over by carts. In short order the most meticulous presentation of produce is destroyed and Walmart’s labor model doesn’t allow for the constant vigilance that is required to maintain the type of presentation standards needed to project a quality image.

Meat is another issue. Case-ready meat may be safer due to its centralized processing and offer supply chain advantages such as longer shelf life, but it is absolutely the most unappealing way to present the product. Who wants to buy a package of New York strips sitting in a pool of blood in a black plastic tub that has been enhanced with a solution? The steaks don’t look good, and discriminating shoppers who read the fine print on labels prefer to do their own enhancing.

None of the above changes the fact that Walmart sells a lot of meat and produce.

It just doesn’t sell as much as it could to shoppers who are already in its stores and choosing to go elsewhere for produce and meat even as they load up on frozen, refrigerated and dry groceries. Then there are other shopper segments that Walmart is missing including those who don’t have convenient access to one of its 2,907 supercenters or who avoid the place because of the product, presentation and overall experience.

It is this latter segment where Walmart has the potential to win with home delivery of groceries, as it would be able to eliminate the variable of store experience from the decision-making process of where to buy food. The type of shopper most inclined to use a home-delivery service is a busy professional with kids who tends to have an above average income yet still wants to save money. In other words, exactly the type of shopper Walmart was going after with Project Impact when it sought to upgrade the store experience.

If Walmart can provide high quality fresh food at low prices and customers can avoid going to one of its stores, well that is likely to be an appealing value proposition for a meaningful number of shoppers. And if any company is going to be able to make the economics of home delivery work it should be Walmart. The company has a supply chain advantage, and its Asda division in the United Kingdom is already successfully providing the service.

Last year, the grocery category accounted for 54% of the U.S. stores division’s sales of $260 billion. The true performance of fresh categories are blurred by the fact that Walmart defines grocery broadly to include meat, produce, deli, bakery, dairy, frozen foods, alcoholic and nonalcoholic beverages, floral, dry grocery, health and beauty, baby products, household chemicals, paper goods and pet supplies.

The number could be a lot higher, but Walmart will need to figure out a way to profitably deliver meat and produce to existing shoppers who aren’t presently buying those categories in stores in addition to new customers who would like to have those products brought to their home.