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Wal-Mart Collaborates with Uber and Lyft to Deliver Groceries

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It seems that Wal-Mart Stores Inc . WMT is leaving no stone unturned to get a stake in the delivery space. Most recently, the retail giant announced that it will partner with ride hailing services Uber and Lyft for speedy online grocery deliveries and to better compete with rival Amazon.com, Inc. AMZN . The trials will begin within the next two weeks in Denver and Phoenix.

Customers can order goods online and select same-day or scheduled delivery. Wal-Mart employees will then summon a driver from the ride-hailing firm to pick up the shipment and take it to the customer, who will be notified that the delivery is on its way. The world's largest retailer said it will charge customers $7 to $10 for its new delivery service.

We believe Wal-Mart's new delivery service with Uber and Lyft will be beneficial to inner-city workers who do not own cars and for whom grocery trips are often limited to what they can carry home.

Online grocery shopping and delivery is a booming industry worth $10.9 billion in the U.S., and Wal-Mart is aggressively trying to get a share of the pie.

The largest grocer in the U.S. is already expanding its online order options to offer grocery deliveries within two days for a $49 minimum annual fee through its ShippingPass e-commerce subscription program. The program competes with Amazon's Prime service, which costs $99 annually.

In April, Wal-Mart reportedly expanded its free curbside pickup of groceries to eight cities including Kansas City and Austin. Including these new cities, Wal-Mart's free grocery pick-up service - launched last September - will be available in 30 cities across the nation. In cities where it already has stores, the retail giant will increase its store count offering the service by a third to about 200.

Besides grocery delivery, this Bentonville, AR-based retailer is also seeking drones for delivery and for use in warehouses. It reportedly plans to roll out drones in the next six to nine months in order to manage warehouse inventories in the U.S., following the footsteps of Amazon.

In an effort to compete with Amazon and to improve customer service, Wal-Mart is aggressively investing in its e-commerce business, which is increasing its expense burden. Wal-Mart has also pledged to invest $2.7 billion on raising employees' wages and give them extra training in fiscal 2017. Under the initiative, Wal-Mart had increased its minimum wage to $9 an hour in Apr 2015, and to $10 per hour in Feb 2016. Higher labor costs along with the company's efforts to overhaul its stores and invest in its online operations will weigh on its earnings.

Wal-Mart currently holds a Zacks Rank #2 (Buy).

Stocks to Consider

Investors interested in the same space may also consider The Kroger Co. KR andThe Children's Place, Inc. PLCE . Both of them hold a Zacks Rank #2.

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AMAZON.COM INC (AMZN): Free Stock Analysis Report

CHILDRENS PLACE (PLCE): Free Stock Analysis Report

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KROGER CO (KR): Free Stock Analysis Report

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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