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Walmart Plays Another Card: Stays Firm Amid Grocery Retailers

Vrishali Bagree
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With the e-commerce market getting intensely competitive by the day, retailers are making constant efforts to stay ahead in the game. Apart from getting into strategic alliances, making prudent acquisitions or developing websites and mobile apps, providing seamless deliveries is the latest mantra of the e-commerce space.

In this regard, Walmart Inc.’s WMT consistent efforts to counter Amazon AMZN have been one of the most talked-about developments. The supermarket giant, which scooped up Jet.com in 2016, has left no stone unturned to take on Amazon. From speedy deliveries to payment systems and from selling grocery to offering meal-kits, the players have been going head to head for quite some time now.

Will Jet.com’s Latest Move Up Walmart’s Game?

Walmart raised its game through the announcement of plans to open a fulfillment center for Jet.com in New York, per sources. Evidently, rumors have been doing the rounds that the world’s largest retailer is planning to foray into New York, not through its own stores but by setting up a Jet.com fulfilment center in Bronx. This will help Walmart test same-day deliveries of Jet.com’s products in the largest city of the United States.  

The facility, which is likely to open this fall, will support deliveries of products ranging from fresh groceries to even Apple AAPL electronics. Jet.com plans to carry out the delivery process, using services of last-mile delivery provider Parcel Inc., which was taken over by Walmart last year. Sources further revealed that for starters, this center in New York will remain exclusive to handling deliveries of Jet.com. Also, it will only store inventories.

Notably, this move is in line with Jet.com’s focus on targeting urban millennials, unlike Walmart’s conventional rural or suburban customers. Clearly, this is likely to fortify Walmart’s presence in the deliveries and online grocery space.  Well, Walmart is doing every bit to exploit the opportunities in the booming online grocery space — from inking deals with Postmates and DoorDash to the acquisition of Parcel. The company has also introduced a line of kitchen products in collaboration with Buzzfeed’s Tasty.  

In earlier developments, Walmart partnered with ride hailing services like Uber and Lyft for speedy online grocery deliveries, while it also tested same-day delivery with Deliv, in a bid to enhance its services. We believe that these actions help Walmart offer multiple choices to online grocery shoppers amid pose stiff competition to Amazon. Also, it should help the company extend its online grocery delivery service to nearly 800 stores by the end of this year.

WMT, TGT, KR – All in the Race

Walmart, which generates a chunk of revenues from food sales, has been taking perfervid initiatives in the delivery services realm to combat Amazon. Incidentally, Amazon has been trying to exploit every nook and cranny of the online grocery delivery space, largely owing to advantages associated with Whole Foods, which was taken over by this Zacks Rank #3 (Hold) company last year. Ever since, the dot.com giant has been dedicatedly integrating Whole Foods into its Prime operations and exploiting it strategically to attract customers and enhance their experience.

Consequently, Walmart and retail behemoths like Target TGT and Kroger KR are constantly revisiting their strategy to stay firm amid the competitive frenzy. Kroger, for instance, has been steadily creating a niche in the burgeoning online grocery space. The supermarket retailer’s recent deal with Nuro (the maker of driverless road vehicles) to deliver groceries at customers’ door steps is just another way to take on rivals. Also, the Cincinnati-based retailer’s agreement with Instacart for same-day deliveries, and ClickList order online and pick up in store services tell the tale of its efforts to stay abreast in the online grocery space.

Moving to Target, the company is deploying resources to enhance omni-channel capacities and expand same-day delivery options. Toward this end, the company has undertaken rationalization of supply chain with same-day delivery of in-store purchases for a flat fee along with technology and process improvements. Further, Target acquired Shipt to expand same-day delivery — an announcement that followed plans to initiate same-day delivery in New England, Philadelphia, Washington, DC and Baltimore for more than 55,000 groceries, essentials, home, electronics, toys and other products. Apart from this, the company’s Target Restock program and Drive Up service deserve a mention when it comes to talking about its efforts in the online delivery space.

Retail Space in the Pink

Buoyed by such efforts, Walmart, Kroger and Target, each with a Zacks Rank #3 have seen their shares rally close to 21%, 29% and 60%, respectively, in the past year. We expect the trend to sustain and keep driving the Zacks Retail – Wholesale sector that has gained 29.1% in a year’s time, comfortably outdoing the S&P 500’s rise of 16.7%. Markedly, the sector is placed in the top 38% of the 16 Zacks sectors.

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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