Dive Brief:
- Walmart's store-fulfilled delivery sales have nearly tripled over the last two years, and the company is now seeing more than $1 billion a month in that category, CFO and Executive Vice President John David Rainey said on the company's Q4 earnings call Feb. 21.
- The retailer has been expanding its store-based delivery capabilities in recent years amid the e-commerce boom. More than 3,900 Walmart U.S. stores now offer same-day delivery, out of 4,717 locations overall, per an earnings presentation.
- Walmart U.S. isn't the only company segment benefiting from increased delivery activity. E-commerce sales at Sam's Club jumped 21% YoY in Q4, "with contributions from both curbside and ship to home," Rainey said.
Dive Insight:
Retailers have made heavy adjustments throughout the years to make room for increased order activity outside brick-and-mortar locations, especially after the COVID-19 pandemic accelerated e-commerce activity. Fulfilling online orders from stores allows them to save on transportation costs and speed up deliveries by leveraging in-store inventory that's often closer to the end consumer than a warehouse is.
These benefits help explain the various in-store fulfillment initiatives retailers have rolled out recently.
Target is ramping up its next-day delivery capabilities through its stores-as-hubs strategy that uses retail space for fulfillment. Meanwhile, Macy's established mini distribution centers at 35 stores ahead of last year's peak shipping season. And Boot Barn has added in-store fulfillment to its omnichannel offering, giving online customers access to merchandise from more than 300 stores across the country, President and CEO Jim Conroy said on a January earnings call.
"In-store fulfillment has resulted in shorter delivery times and a pronounced expansion of exclusive brand sales online, which further contributes to the profitability of the business," Conroy said.
Walmart is no exception to this trend. The company has improved its flexibility in terms of how shoppers can receive their goods, be it through in-store purchases, order pickups or deliveries, Walmart U.S. President and CEO John Furner said on the call. In 2022, the retailer increased its online pickup and delivery slot availability by 40%, according to a video on its website.
The success of a store-fulfilled delivery program isn't guaranteed, however.
Nordstrom reduced store-based order fulfillment at its Rack stores after it didn't reach the retailer's customer experience standards, CEO Erik Nordstrom said on a November earnings call. He said the company saw higher order cancellation rates in store fulfillment "because it's a little more difficult finding the product in a treasure hunt environment in the stores."
