Curbside pickup, delivery poised to boost Walmart sales
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Walmart reports quarterly earnings this Tuesday. The company’s stores have stayed open throughout the crisis, giving it a front-row seat on how our shopping habits have changed.
One of the brightest spots of Walmart’s business has been curbside pickup, a service where customers order things online, drive to the store and wait while a worker loads everything into their trunks.
“And that, during COVID, has just accelerated,” said Lei Duran, who follows Walmart for the research firm Kantar. She said curbside pickup has gotten huge because people are using the service to buy groceries.
That’s an area where Walmart already dominates.
“We show that half of all online grocery shoppers are using Walmart for their online grocery orders,” Duran said.
Walmart’s success with curbside pickup comes with costs. Charlie O’Shea, Moody’s lead retail analyst for Walmart, said labor is a big one. It’s a manually intensive process for workers to pick out and scan hundreds of grocery products.
“You’ll see the employees standing in front of the shelf, kind of scratching their head every so often, [thinking] ‘All right, which one of these, and uh-oh we don’t have it. What do I substitute?’ ” O’Shea said.
Groceries also carry lower margins than the other products Walmart sells, like barbecues, bikes or clothes. On Friday, the government said apparel sales dropped almost 80% last month.
O’Shea said the crisis is changing the way Walmart makes money.
“You’re going to see just absolute blowout sales in food, consumables. You will see obvious softness in the discretionary categories.”
Curbside pickup has one big advantage for Walmart. It doesn’t have to deliver those groceries to your house. Brian Yarbrough, a consumer research analyst at Edward Jones, said curbside pickup is more profitable for retailers than online delivery.
“It’s the shipping costs and the free shipping that really eats all the margins,” Yarbrough said, adding that the pandemic is pushing more customers toward online delivery, too. While Walmart loses money delivering products to customers, he says it can still benefit.
“For Walmart, it’s about gaining market share, and gaining new customers, and offering the options,” he said. What remains to be seen, Yarbrough said, is whether those new customers continue to shop at Walmart when the pandemic calms down.
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