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Online grocery is 'creating a halo effect' on the rest of Walmart: US CEO



Walmart (WMT) has seen the future, and it’s selling groceries on the web.

The retail giant sees online grocery pickup and delivery as a game-changer, amid efforts to expand the popular service across its U.S. stores.

Walmart doesn't break out performance from stores that offer online grocery services versus the stores without it. Still, Walmart's U.S. president and CEO Greg Foran told Yahoo Finance recently that "it's clear" customers appreciate grocery pickup and delivery.

And they’re not the only ones.

The benefits are “not just for those customers who want the ease and convenience of being able to order online and pick it up or have it delivered, but there's an added benefit for those in store," Foran told Yahoo Finance, speaking ahead of Walmart’s Shareholders meeting.

“Because if you think about it, what we're doing in this business is we're transforming ourselves from being not just a mass merchant, but to also being a personal shopper,” Foran added. “And it's sort of an oxymoron when you think about it."

‘A halo effect’

The company’s annual gathering draws a crowd of nearly 14,000 investors and associates to the retailer’s home in northwest Arkansas.

Walmart—which first introduced a pilot online grocery program in late 2013— competes in the online delivery space with Amazon (AMZN), its fiercest retail rival. In 2017, Amazon acquired Whole Foods in a $13.7 billion deal, added Whole Foods delivery to its Prime service, and recently began cutting prices at the upscale grocer.

That September, Walmart opened its 1,000th pickup location, and has since ramped up its expansion efforts.

One of the added benefits of running a web-based grocery service, Foran explained to Yahoo Finance, is the improvement in how the stores operate.

"[It's] a real skill to be able to do this, but as you develop the skills to become a personal shopper, what happens is you create a halo effect on the rest of your business because things have to improve,” Foran stated.

With grocery pickup and delivery, Walmart has trained thousands of its associates to work as personal shoppers "who are literally going around and picking up items for customers, which are going to be delivered to their house,” the executive said.

"They will have to ensure that every item that is on display is good enough for a personal shopper. So what we see is a halo effect in the store, and it's a real benefit," he added.

Walmart and Amazon lead the way in online grocery shopping.

In a recent note, Citigroup analysts found that the Walmart stores with grocery pickup and delivery have helped attract new customers, drive bigger basket sizes from those shoppers using the service, and led to higher product availability and sales in those stores versus the ones without the offering.

"We believe that Walmart has emerged as a true omnichannel competition to Amazon, and its grocery initiatives are a significant reason for this," Citigroup's Gregory Badishkanian wrote.

Presently, 2,450 Walmart stores in the U.S. feature grocery pickup and 1,000 stores offer grocery delivery.

By year-end, Walmart expects to have grocery pickup at 3,100 stores and same-day grocery delivery from 1,600, covering approximately 80% and 50% of the U.S. population, respectively.

A livestream of the event will be available on Yahoo Finance on June 7.

Watch the full interview below.

Julia La Roche is a finance reporter at Yahoo Finance. Follow her on Twitter.