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Sam’s Club to push same-day grocery deliveries with Instacart deal
Sam’s Club has announced that it is partnering with Instacart to offer same-day delivery in three cities beginning today, with plans to roll out the service across the U.S. this year and beyond.
The initial markets being served are Austin, Dallas and Fort Worth, TX, as well as St. Louis, MO. Shopping at Sam’s using Instacart will not require a membership to the warehouse club chain, but non-members will pay higher prices. The service will deliver groceries and small appliances.
“Whether it’s Scan & Go, Club Pickup — and now delivery in as little as an hour — shopping with Sam’s Club is getting easier and more convenient, and we’re just getting started,” said Sachin Padwal, Sam’s Club’s vice president of omnichannel and in-club product, in a statement. “Instacart is a trusted partner by so many customers, we are thrilled to be launching this service with them.”
Sam’s recently announced plans to consolidate the number of memberships it offers from three to two. The company also reiterated its plan to focus more of its efforts online. Sam’s will open its first online fulfillment center in Memphis, TN this spring. It is currently scouting locations including Central Florida, the Chicago area, the Mid-Atlantic, the Northeast, Southern California and Texas to add others starting in the second half of the year.
The deal between the two companies raises the question whether Walmart, which owns Sam’s, will also partner with Instacart. The nation’s largest grocer offers same-day delivery in some markets using Uber or Deliv and is testing deliveries using its own trucks in Denver, according to Reuters.
Instacart recently announced it had raised $200 million in a new round of funding. The service is working with 200 grocery partners in the U.S., including seven of the top eight.
- Sam’s Club Joins Forces with Instacart to offer Same-Day Delivery of Groceries and Everyday Essentials – Sam’s Club
- Sam’s Club partners with Instacart to deliver groceries – Reuters
- Sam’s Club takes on Costco and Amazon with a new strategy – RetailWire
- Will Instacart and Shipt give Amazon a run for its money? – RetailWire
Discussion Questions
DISCUSSION QUESTIONS: What will Sam’s partnership with Instacart mean for the warehouse club chain’s membership numbers, sales and mix of online to in-club revenues? Do you expect that Walmart will beginning working with Instacart, as well?
Poll
BrainTrust
Chris Petersen, PhD.
President, Integrated Marketing Solutions
Richard J. George, Ph.D.
Professor of Food Marketing, Haub School of Business, Saint Joseph's University
Sam’s offering same-day delivery is a nice-to-have convenience, but I don’t see the service by itself being a huge game changer. Price and product will still need to be competitive. Sam’s will continue to have loyal customers, and there will be customers who will shop elsewhere. Today we are putting great emphasis on conveniences to remain competitive but, unfortunately, many of these conveniences like same-day delivery have a significant cost. Moreover the more we make it easier for the customer to get what they want without a reason to come in-store, the more sales we lose from lack of impulse buying. However, when one retailer offers something, other retailers are forced to follow, and that is what we are seeing now with many retailers competing on same-day delivery.
This is a good, but not revolutionary, move by Sam’s. It may drive sales and membership a bit, but I cannot see it making a massive difference.
The main reason for this is that Sam’s isn’t differentiating. Costco already partners with Instacart, as do many other grocers. To win, Sam’s needs to look at ways of being unique, not of being an imitator.
The last mile is growing shorter and faster. Kudos to Walmart for continuing to push the envelope and leverage their assets. From a one-day delivery aspect, Walmart can beat Amazon in costs of delivery if it optimizes its stores as hubs. But the end game is not going to be about just one-day delivery. Today’s omnichannel customers want options. In just the last couple of years, Walmart has developed a number of consumer-centric options: click and collect in store and by kiosks, Scan and Go and options for delivery.
While Wall Street hammered Walmart regarding online growth in the last quarter, Walmart must continue to invest in consumer-centric services. Whether it is Instacart, Uber or it’s own employees, home delivery is an essential part of the solution for today’s customer. The most positive sign from Walmart these days is their willingness to aggressively test a number of alternatives.
Same-day delivery is becoming a standard for retailers and they need a good execution partner to do it, otherwise costs are prohibitive. Since Sam’s is developing its online business they should have same-day delivery, but it looks more like a defensive move to match competition offerings. Walmart is testing different methods of last-mile delivery and most likely Instacart’s cooperation with Sam’s can serve as a pilot to compare to other options.
I agree with Art — Same-day delivery is a reaction to our friends in Seattle but very few retailers have been able to execute on it profitably. Even Amazon shut down its Amazon Fresh service in several cities a few months back — it’s just really difficult to make any money with it. I would anticipate that if Sam’s can make this relationship work and can actually execute at a break-even or better bottom line, Walmart just may look to buy Instacart.
For customers, especially those at small businesses that have a hard time leaving their workplace during the day, the same-day service could turn out to be a great convenience and hence, Sam’s could benefit.
This is something that fits into the overall Walmart strategy, and there will be folks who will use the service. I looked into Costco, with their new delivery service, and basically it has jacked up all the prices to make up the cost to deliver. Everything was around $1 per SKU higher than the folks who go to the warehouse and buy it, as I know their prices for my pickups. Some may not be aware of this but, again, nothing is free, and Costco along with Sam’s will offer this service for anyone who wants to pay extra — so let the buyer beware.
Raising prices to cover delivery seems to be a trend with grocery brands. I see this locally with Wegmans who has also partnered with Instacart – most SKUs are slightly higher priced via Instacart compared to in-store. If this trend continues I don’t see any of these brands realizing any consumer benefit and loyalty from delivery – consumers want to pay the same price for merchandise. Better to charge for delivery than to raise the prices of each item!
True, but the Catch 22 is that the customer doesn’t want to pay for delivery either, as they have no clue what the cost to deliver is, nor do they care. Some will pay no matter what, but in my town, it simply doesn’t work. Amazon has created this false scenario that everything should be shipped free, and consumers are buying into it. So again, it is a tough thing to overcome, as we in the supermarket business run on the smallest margins ever.
I don’t think it’s about the partnership as much as the offer. Sam’s is getting into home delivery. They are going up against Amazon and local retailers who deliver (many using Insticart). It’s a little bit of “keep up” to stay competitive. It’s also what consumers expect – another level of convenience.
And yes, I expect it’s a just a matter of time before Walmart delivers.
With all of the investment and research Walmart has been doing to catch up to Amazon, I find the Instacart relationship a bit puzzling. Walmart was always been recognized as a terrific logistics company. Obviously, the company expects to accelerate the final mile learning process via an Instacart partnership with Sam’s Club. I do not view this as a long-term final mile solution for either Sam’s or Walmart.
The joy and cost of shopping at warehouse clubs is the treasure hunt aspect and unexpected purchases (and the size of your final bill). Most shoppers cannot go in and leave with only the items on their list (assuming they have one). The Instacart partnership will be a boon for small businesses that can now get delivery (and given the above, it may even reduce their bills … it certainly will for non-business shoppers), but may come back to bite Sam’s Club as it will eliminate large and profitable unexpected impulse purchases.
This is, of course, further proof that this year’s retail battleground will be fought in last-mile delivery! While great news for existing Sam’s Club members, this feels a bit “me too” competitively. I’m not sure it will appreciably add new members to Sam’s Club, but it may be enough of a reason to nudge some consumers to give them a try. It does raise an interesting question about Walmart and Instacart. Could there be an acquisition in the future? Time will tell …
All very good comments from my fellow panelists. I agree with Dr. George that it is a bit bizarre that a company the size of Sam’s/Walmart would not opt to create their own delivery system, building off of their industry leading logistics platform. Perhaps they are using Instacart as a means to learn and later emulate their process. This move could also be an indication, as Dr. Herb Sorensen has often contended, that Walmart/Sam’s logistical platform is built for moving pallets, not individual items. Home delivery and any “last mile” initiative is an exercise in moving individual items to individual customers, not something that most retailers other than Amazon are very good at.
The warehouse club model (at least for us non business buyers) is the in-person experience. Alleviating that shopping trip by online order and delivery just turns the experience into an undifferentiated buy from anyone with delivery, which changes the equation to solely the price to my door. I bet on smaller baskets, and lower profit as the outcome for this one.
Once again, a retailer that should understand that the only way to achieve a long-term competitive advantage is by designing and implementing an integrated (Walmart and Sam’s Club) Last Mile Delivery solution specific to the needs of their customers, instead has joined the herd and chosen the path of least resistance. I’m incredulous at the fact that Sachin Padwal, Sam’s Club’s Vice President of Omnichannel and In-Club Product, honestly believes Sam’s Club partnering with Instacart is strategic to Sam’s Club. At a time when it is essential that Walmart make big moves to place distance between their competitors, Walmart has chosen to think small.
Walmart needs to hire someone and have them be responsible for designing and implementing a last mile delivery solution that utilizes the Walmart ecosystem, this means Sam’s Club and Walmart, to its fullest potential. To think that a company with over 140 million customers can’t manage their own last mile needs is inexcusable.
If Walmart isn’t up to the challenge of managing their own last mile needs, GO BIG. Don’t partner with Instacart, acquire Instacart. Since furniture, appliance and Home is becoming more of a focus for Walmart, acquire Sears Home Services, or acquire XPO Logistics and regional in-home appliance and repair companies. I believe it would be interesting if XPO Logistics acquired Sears Home Services and rebranded the business to XPO Home Services.
I can think of no other company with greater potential in last mile delivery than Walmart. It’s time that Walmart finds the right leader who can not only design and implement a last mile delivery solution that will achieve a competitive advantage, but also influence Walmart’s executive team to understand the importance of Walmart leveraging their overall transportation and logistics prowess on a grander scale.
My intuitive response is that this doesn’t make a lot of sense. Sam’s (or any w/house club) specializes in volume purchases … not container-loads, perhaps, but still pallets or at least cases; at any rate it’s the kind of purchase that’s price sensitive and shouldn’t be needing same-day delivery (at least not if the buyer is competent in managing inventory).
The reality of course may be a little different, but until it works I’ll be dubious; and my opinion of a Walmart-Instacart marriage isn’t much different.