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Feb 21, 2020

Walmart loses another home-delivery provider amid Amazon clash

Low unemployment, inflation, fuel prices all tailwinds for Walmart: Analyst

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Walmart Inc. is parting ways with grocery-delivery partner Skipcart, the latest defection from its network of logistics companies who often struggle to make ends meet schlepping cola and cantaloupes for the nation’s biggest food retailer.

Skipcart notified Walmart on Jan. 31 that it was terminating their relationship effective April 30, according to a letter obtained by Bloomberg News. That end date has since been pushed up to March, and Walmart has already reassigned stores covered by Skipcart to other providers. Boerne, Texas-based Skipcart handles deliveries from about 126 stores in 32 states, mostly in smaller markets, and began working with Walmart in late 2018.

A representative for Walmart declined to comment.

The departure of Skipcart follows those of Deliv last year and Uber Technologies in 2018, highlighting the tricky economics of so-called “last mile” delivery as more and more Americans buy groceries online. Skipcart Chief Executive Officer Ben Jones said his company was handling about 50,000 Walmart deliveries a month, but was losing money “hand over fist.” He said he would rather focus on restaurant deliveries, which are easier and more profitable to shuttle than carloads of bottled water and paper towels.

“The grocery model does not work,” Jones said in an interview. “It doesn’t work today, and it’s not going to work six months from now. We’re all losing money.”

Neck-and-Neck

Walmart can’t afford to lose momentum in its market-leading grocery business, which makes up 56 per cent of its U.S. sales and has fueled its run of 22 consecutive quarters of same-store sales growth in its home market. Amazon.com Inc. now offers two-hour grocery delivery for its Prime customers for free in more than 2,000 cities, and grocery orders more than doubled in the fourth quarter.

While the web-only accounts for about four per cent of the US$800-billion U.S. grocery sector, adoption is increasing. Over half of all current online grocery shoppers started doing so over the past year, according to a survey of about 3,000 Americans by Morgan Stanley. Walmart and Amazon are neck-and-neck at the top of the market, the survey found, with about half of all web shoppers having used one of them in the past three months.

Walmart offers home delivery of groceries from about 1,600 stores today, double the number it had a year ago, with the goods ferried by a patchwork of companies including Postmates Inc., DoorDash Inc., Roadie and Point Pickup. Customers pay a fee of US$7.95 to US$9.95, which varies based on the delivery time. The retailer has also built its own internal delivery platform for self-employed drivers called Spark, which is now available in 31 states, and it’s testing autonomous vehicles as well.

Food shoppers can also pick up online orders in Walmart’s parking lots for free at 3,200 stores, with another 500 coming on board this year.