When will all of the Walmarts Supercenters be
The food industry in America is a trillion dollar business with little national competition. The industry is regionally competitive as smaller chains and independent grocers have market shares from Wal-Mart Stores Inc. (WMT WMTWal-Mart Stores Inc88. 47-0. 26% with Highstock 4.26 and Kroger Co. (KR KRKroger Co21, 43 + 0, 47%, created with Highstock 4.26). In-store pickup or delivery is a breeze for established grocery stores as the inventory and supply chain is already in place. The only additional cost is having a staff member responsible for the customer goes shopping and someone else delivers the food.
Online orders are associated with a lot of effort: an e-commerce website. Smaller chains cannot afford to set up an ecommerce website, and even larger grocery chains that have an ecommerce website do not have real online ordering. In fact, there are only two major stores where Americans can order and have a wide variety of perishable and long-life foods delivered online.
Walmart's entry into the online grocery store is an extension of the established grocery store. Every business has to expand and innovate to survive and Walmart was no exception. Recently, Walmart began offering online ordering and delivery / collection from test locations in the United States. These locations aren't in the urban centers you envision, but rather in the areas that have served Walmart well in the past: rural and suburban America. (For related reading, see Why Wal-Mart Is No Longer Growing.)
Walmart can easily step into the online grocery world as it has the infrastructure and financial resources to fill any gaps. Walmart has the suppliers, the "warehouses" (existing super-centers), the resources to recruit, and the ability to weather any financial losses that can arise when this foray into online grocery doesn't work.
Online grocery shopping is very popular internationally. By walking slowly and avoiding mistakes that plagued previous online grocers, Walmart has a real chance of changing the way Americans shop for groceries. Walmart hopes that in the not too distant future, Americans will put their kids to bed and log into the Walmart website or mobile app to shop for groceries. Whether customers pay extra to have it delivered or to collect the groceries for free is up to them, but having more choice for busy people is a great way to get customers to spend their money in your store. Walmart's biggest job right now is getting customers to spend their money on Walmart instead of Amazon.com Inc. (AMZN AMZNAmazon.com Inc1, 127.05 + 0. 57% Created with Highstock 4.26).
Amazon is a less obvious entry into the online grocery business. Interested in a business that could one day become profitable, Amazon has been experimenting with its online grocery store, Amazon Fresh, in large urban areas for the past few years. (For more information, see: How Amazon Fresh Works.)
The difference between Amazon and Walmart is the physical storage area. While Walmart has 3,400 super centers in the U.S. that already sell fresh groceries, Amazon doesn't. That means the e-commerce giant will have to build or renovate new facilities and focus on more populated areas for the numbers to work. Walmart is using online grocery as a business extension; Amazon creates an online grocery store. One of these is much more expensive than the other and inherently riskier.
Target Corp. (TGT TGTTarget Corp58. 89-0. 68% Created with Highstock 4. 2. 6) is definitely the outlier in the online food industry. Not only does Target have a notoriously bad ecommerce website, but it doesn't have the fresh food infrastructure that would make it a strong player in the online food game. Despite investing $ 1 billion in networking and technology, Target's website crashed on Cyber Monday, and since early November 2015 the company has been looking for an outside company to supply its fresh produce departments.
While Walmart and Amazon already had a foothold in the online grocery world, Targets attempts in the online grocery store are confusing. Why would the retailer want to spend all the money and time and resources to get into a business with such small margins?
Again, the grocery store in America is worth $ 1 trillion. That's a lot of money Target is putting into its large retail competitors. For Target at this point, trying to take market share from Walmart and back from Amazon is an attempt at survival. Online fresh produce will be the future of the food industry, and Target can see its customers run away on the promise of true one-stop shopping. To stop consumers from abandoning Target, the retailer must venture into the world of online grocery shopping. (For related reading, see: Wal-Mart vs. Target: Which Is a Major Threat to Amazon?)
The bottom line
Retailers are moving into an expanding new, low-margin market - online grocery. For Walmart, online grocery represents an opportunity to dominate the grocery industry even more by using their existing 3,400 super-centers as distribution points for their new fresh and long-life delivery and pick-up online grocery shoppers. Amazon uses its customer base and the massively popular Amazon Prime to target city dwellers who want to deliver groceries the same day or the next day.
Target is expanding into online grocery stores as a means of survival, but there's little for its busy mom clientele to get them into Target when they can sit at home and have everything they need delivered to their doorstep.
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