Personal Finance

Wal-Mart's Latest Delivery Idea Is So Crazy It Just Might Work

A Wal-Mart employee prepares to make a delivery.

After years of falling behind (NASDAQ: AMZN) in e-commerce, Wal-Mart Stores, Inc. (NYSE: WMT) is finally starting to play catch up.

Over the last year, the world's largest retailer has made a number of aggressive moves to claw back market share from the e-commerce giant. It spent $3.3 billion to acquire last summer, bringing on board the start-up's proprietary price-saving technology and its founder, Marc Lore, one of the most respected minds in e-commerce.

More recently, the retail titan bought a number of smaller online fashion retailers this year, including ModCloth, Moosejaw, and ShoeBuy, as it seeks to add more firepower to its e-commerce division. Wal-Mart also scrapped its membership-based Shipping Pass program and instead now offers free two-day shipping on all orders of $35 or more. And in April, the company started offering discounts on select items if customers pick them up in stores, leveraging its store footprint.Yet another initiative also makes use of its current assets.

It's like Uber, but for Wal-Mart

This time, Wal-Mart is tapping its own employees for delivery online orders, an innovation the company says is "one of a kind" for last-mile delivery. Pioneered by founder Lore, the new program calls on store-based employees to bring packages to customers on their way home from work.

A Wal-Mart employee prepares to make a delivery.

Image source: Wal-Mart.

Wal-Mart is currently testing the program at three stores, two in New Jersey and one in Arkansas, and it says the response from "associates and customers has been great," with many orders being delivered the next day. Lore said he'd like to ramp up the service to same-day deliveries. Ninety percent of the U.S. population lives within 10 miles of a Walmart store, so leveraging its store footprint, whether it be for pick-ups or deliveries, is a key part of the company's e-commerce strategy.

The program is optional for store associates, who can choose the number, size, and weight limits of the packages they deliver, as well as what days they can make deliveries. Employees seem to like it as it gives them an opportunity to earn extra income.

Amazon launched a similar program, Amazon Flex, in 2015, hiring independent drivers to make deliveries. However, that program remains just a tiny slice of Amazon's delivery infrastructure, and it rates just 2.2 stars on Glassdoor, with only 32% of reviewers saying they'd recommend it to a friend. From a driver standpoint, it hardly seems like a success. Wal-Mart also notes an important difference between the two. Since Wal-Mart's employees are leaving from the same place as the packages and finishing at home, their total driving time is shorter, making it more efficient.

Speed is the name of the game

Last-mile delivery is a notorious headache for logistics and delivery providers like the U.S. Postal Service, FedEx , and UPS , which is why Amazon has begun building out its own supplementary delivery network. It's also established small warehouses in cities to support its Prime Now service, which offers delivery in as little as an hour for an extra charge. Amazon Prime has made two-day delivery the industry standard, and it's up to competitors to match it. Wal-Mart's decision to offer free two-day shipping with a $35 order minimum was a wise move, and the employee delivery program should also make it more competitive with Amazon.

Wal-Mart has 4,700 stores across the country, each with an average number of employees of about 300. If the program is popular enough with store associates, it could potentially handle $1 billion in e-commerce deliveries a year. That won't make Wal-Mart independent from delivery providers like the USPS, but it could make a difference for ensuring speedy delivery on key items and for saving money on the bottom line.

There's no word yet on when Wal-Mart is going to expand the program to other stores, but I'd expect it to ramp up as soon as the company sees it benefiting a wide range of stakeholders. Expect more innovations like this from Lore and company as Wal-Mart continues to look for ways to narrow the gap with Amazon.

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Jeremy Bowman has no position in any stocks mentioned. The Motley Fool owns shares of and recommends Amazon. The Motley Fool recommends FedEx. The Motley Fool has a disclosure policy .

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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