Walmart (WMT) has lined up two key new partners in combatting Amazon.com’s (AMZN) challenge in the grocery delivery wars: ride-sharing giants Uber and Lyft.
In a test, the largest U.S. retailer will use either Uber or Lyft for the so-called “last mile” of grocery delivery in small areas of Denver and Phoenix when a customer requests home delivery. There will be no additional fee to the customer.
“We’ll start small and let our customers guide us, but testing new things like last-mile delivery enables us to better understand the various ways we can best serve our customers how, when and where they need,” said Michael Bender, the operations chief for Walmart’s e-commerce arm.
The test comes as Walmart tries to fend off Amazon and its increasing push into delivering groceries through its subscription program Prime Fresh Now, with a delivery service of its own.
The stakes are high for Walmart, which got $167 billion last year from groceries, or 56% of its overall annual sales. It can scarcely afford to lose any of that business to rival grocery delivery services. Last quarter, U.S. comparable sales (online sales and sales at stores open at least a year) rose only 1%.
Until now, Walmart has mostly focused its online grocery push on curbside pickup, letting customers in a some test markets pick up their orders by pulling up their cars and having store staff load up their trunks. The company on Thursday said that it would expand that service to 14 new markets by late June, for a total of 54 areas.
But now, under pressure from an Amazon, Walmart is now ramping up doorstep grocery delivery too by enlisting help from Uber and Lyft. The test will start within the next two weeks.
Uber already operates a delivery service, UberRUSH, that operates in a handful of cities along with a separate service that handles meal deliveries from restaurants. For Lyft, however, this would be among its first forays into delivery, marking a possible u-turn in its strategy.
Meanwhile, Sam’s Club, a sister company owned by parent Wal-Mart Stores, recently began testing grocery delivery with Deliv, another Silicon Valley delivery start-up.
A Walmart spokesman declined to disclose what fees it would pay Uber, Lyft or Deliv, and what if any expansion of the test could follow.
Walmart already offers grocery delivery in parts of Denver and Phoenix, using its own trucks. Just as it does with its curbside grocery pickup service, Walmart grocery delivery service lets shoppers place orders online from a selection of 40,000 items (30,000 are food, while the rest are items like cosmetics, diapers and pet food.) Walmart and Sam’s Club’s employees then select items from inside the store and prepare customer orders.
The AmazonFresh service gives that retailer’s customers a way order groceries, including perishable items like dairy, meat and fish, for delivery within 24 hours. But to be able to do that, they have to pay $299 for the Prime Fresh membership that includes other perks that come with the regular $99 Amazon Prime program. Amazon began testing the service in 2007, but has been slow to expand it. It is currently available only in parts of Washington state, California, New Jersey, New York City and Philadelphia.