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Walmart CEO: We won't rush associate delivery program testing

Thomas Barrabi

Walmart (NYSE:WMT) CEO Doug McMillon stressed Friday that the retail giant would “take its time” with the testing and rollout of its new associate delivery program.

The new initiative enlists Walmart store associates to conduct “last-mile” package deliveries to online customers. The company says the strategy – its latest effort to compete with rival Amazon’s (NASDAQ:AMZN)’s booming ecommerce business, will cut costs on the most expensive part of the shipping process.

“I wouldn’t jump to a conclusion that it’s going to be nationwide too soon. We’ve got a lot to work on there,” McMillon said during a Q&A session with investors and analysts.

McMillon said Walmart is focused on ironing out any issues with “employment compliance,” such as appropriate pay and treatment of employees that volunteer for the program, before any further expansion. At present, the associate delivery program is being tested at three stores in New Jersey and Arkansas.

In addition, McMillon said the program will evolve over time. For example, Walmart may enlist Uber to assist with last-mile deliveries, similarly to how the company has used the ride-sharing service for deliveries in its fresh groceries business.

“There’ll still be a role for FedEx and UPS to make some deliveries. We’ve had this test going on with Uber and other crowdsourcing solutions may play a role. It’s just like building different capabilities and then we’ll let the market and the economics drive how it ultimately plays out," McMillon said.

Marc Lore, the head of Walmart’s ecommerce business, said the program is still in its “early days.” Walmart is consulting with the volunteer drivers to match delivery routes with their normal commutes, so that store employees aren’t driving too far out of their way to complete shipments. “Associates are really liking the experience,” Lore said.

Walmart has placed an increased emphasis on its ecommerce business in recent quarters, thanks in large part to Amazon’s unprecedented success in the space. Walmart’s ecommerce division, bolstered by the 2015 acquisition of Jet.com, grew by 63% in its most recent fiscal quarter. That has helped drive the stock price up 15% this year.

Lore said Walmart is encouraged by the success its seen from initiatives like discounted in-store pickup, free two-day shipping for customers without a paid membership and “easy reorder” options for returning online customers. He has also stepped up niche apparel acquisitions, including Moosejaw and ModCloth.

In the long term, Lore added that Walmart is focused on adding select new product offerings to its online business, as well as efforts to continue to “bring the Jet and Walmart teams together.”

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