Walmart Unveils New Plan To Compete With Amazon's Grocery Fulfillment

CNBC reports that over the next four years, Walmart plans to open four new automated fulfillment centers, part of a push to bolster their online order delivery to compete directly with retail giant Amazon. As the media outlet explains, right now, workers at Walmart's current warehouses may walk nine or more miles a day to pull shelved items and bring them to their packaging area. Automating the task will make the retailer more efficient and allow for one- to two-day delivery for select items, in direct competition with Amazon Prime.

The number-one retailer in the country has Amazon nipping at its low-cost heels. While Walmart continues to have the leading edge in total sales, Forbes notes that its online sales represent only 13.4% of its $559 billion total revenue from 2021. Amazon's market share, meanwhile, is 40.4% over Walmart.com's 7.1%, but the outlet points out that Walmart's e-commerce has room to grow, and is indeed slowly chipping away at Amazon's dominance.

Still, Supermarket News cites a report from online retail futurecaster Edge by Ascential that forecasts Amazon overtaking Walmart as the largest retailer in the U.S. by 2024. The report also sees e-commerce as the route to growth, rather than the brick-and-mortar stores, which are Walmart's backbone.

These physical stores, however, could serve as a key component to Walmart's continued online growth. Writing on Walmart's corporate blog, Tom Ward, senior vice president of consumer product, considered their physical stores a competitive advantage.

As reported by Chain Store Age, in 2019, Walmart piloted a local fulfillment center in Salem, New Hampshire, essentially building a smaller warehouse into an existing store, using robots to retrieve items and get them ready for packing. This micro-fulfillment center blended with employee-picked items like fresh produce, and the partially automated process enhanced the speed and efficiency of local home delivery and customer pickup at this location. With the increase in online shopping during the pandemic, Walmart announced an expansion of these micro-fulfillment centers in 2021 (via Grocery Drive).

The announcement of these four new fulfillment centers also follows news of Walmart's expansion of its drone delivery service. The Wall Street Journal reports that drone delivery, which Walmart began using at stores in Arkansas in November of 2021, is coming to five additional states. The airborne autonomous parcel delivery can carry up to 10 pounds and arrives with orders in 30 minutes or less. Drone delivery is now available to 4 million households in Arizona, Arkansas, Florida, Texas, Utah, and Virginia.

According to CNBC, fresh and frozen foods will still be packed and distributed via the local stores, but the new fulfillment centers will house pantry items and other shelf-stable grocery store staples.