Walmart Takes Advantage of the Commute Home with New Delivery System
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Walmart, the largest private employer in the United States, is not likely to appear on one of those “ten best places to work” lists anytime soon. It has a reputation for paying very low wages, and has been targeted by activists for alleged unfair work practices.
But things may be about to get worse. According to an article in the Washington Post, Walmart has been experimenting with asking its employees to deliver online orders on their way home from work.
The rationale, according to Walmart executives, is to shave costs on the “last mile” of deliveries, when packages are sent from warehouses to customers’ homes, usually the most expensive component of the order fulfilment process. Walmart has already begun to test the concept at two stores in New Jersey and one in Arkansas, but is mum on when, and whether, the program will roll out more broadly.
Walmart is not the only retailer looking to reduce last-mile delivery costs. In-store pick up of online orders is now commonplace in most brick-and-mortar retailers that also manage an ecommerce channel. But Amazon.com raised eyebrows in 2013 when it announced plans to deliver packages by drone. Amazon.com also launched Amazon locker, in which an online order is sent to a designated pick up point, usually a gas station or convenience store, for customer retrieval. Some online retailers also partner with Uber, Lyft, and Deliv to deliver groceries to consumers, taking advantage of the burgeoning gig economy to cut delivery costs.
Walmart’s employee as delivery-person program is voluntary, and will come with overtime pay for participating employees, a tempting proposition in a company where many employees are paid wages that generate annual incomes below the poverty line. It is unclear whether employees will be reimbursed for gas, insurance, or other out of pocket expenses.
So, is this a brilliant innovation that will be attractive to employees and help Walmart cut costs, or will this be another black mark on Walmart’s already tarnished employment practices? It’s hard to say.
Walmart’s reputation aside, the move is a case study in knowing your own core competencies. Competitive advantage is derived from improving what a company does well, and outsourcing that which it does not do well. Walmart knows what its core competencies are, and outbound logistics and consumer delivery aren’t on that list. While you have to give credit to Walmart brass for recognizing this, and for coming up with a potential solution, I’m not certain asking sales associates ,who make, on average, about nine bucks an hour, to make a few extra stops on their way home to deliver cat food and vacuum cleaners to customers is the best way to do it.
But, one thing is certain: the increase in online ordering, combined with the proliferation of the “gig economy” is changing the face of retail faster than anyone anticipated. Walmart has seen its online sales grow by 63 percent just in the first quarter of 2017, and its idea of turning sales associates into delivery men and women suggests it is having difficulty managing costs in its online business with the same precision as its brick-and-mortar business. In-store pick up, delivery lockers, and now employee delivery. Pretty soon, customers will be manufacturing their own items.