'Walmart To Go' - Walmart Stores' Launches Test of Grocery Home Delivery Service Today in San Jose, California

The Insider - Heard on the Street

As the once popular song asked - "Do you know the way to San Jose?"

For mega-retailer Walmart Stores, Inc., which wants to sell more groceries than it's currently doing in the San Francisco/San Jose Bay Area region, and today launched an online-based grocery home delivery service in San Jose, California, the answer is - hopefully.

In my April 7, 2011 column - A Walmart Grocery Home Delivery Service in San Jose, California Wouldn't Likely Be Much to Write Home About - I wrote about Walmart's probable plan to test an online ordering-based fresh food and grocery home delivery service in San Jose, California. The story was first reported by Bloomberg News (here).

Walmart launched that grocery home delivery service test - which it's named "Walmart To Go" - today in San Jose, beginning with a website section attached to its Walmart.com site, where shoppers in the neighborhoods where the Arkansas-based retailer is conducting what it has announced is a "limited test," can order a selection of fresh food and grocery items and have the products delivered to their homes.

You can view the website, Walmart.com/togo, here. Click here for details on the website about "Walmart To Go."

Walmart is offering a limited assortment of fresh food and grocery items on its grocery home delivery site (which is in beta test mode at present) across the basic grocery store categories, ranging from fresh produce, meat, seafood and other perishables; to packaged food and groceries, health and beauty/body care, pet food and supplies, baby food; and household supplies like paper goods, cleaning products and relate non-foods items.

There's also a section on the site for promotional items (Rollbacks), offered at temporarily reduced prices.

Shoppers can also have their drug prescriptions filled using "Walmart To Go," and have the medications delivered to their homes, along with their groceries.

Walmart is currently charging $5 and up for home delivery. According to the website, the current minimum purchase amount required to get a grocery order delivered is $49.00.

As part of the launch, "Walmart To Go" is offering an E-Voucher that shoppers can use to get their first order delivered free of charge.

In order to find out if "Walmart To Go" delivers to their neighborhood, potential online shoppers in San Jose need to put their zip code into a section on the website. If the service is available in their neighborhood, it will let the user know.

I typed in a few different zip codes for various parts of San Jose. The site indicated "Walmart To Go" delivered to about 40% of the zip codes I  punched in. But I didn't do a random sample. Nor did I try all of the available zip codes for the city.

The prices on the assortment of items currently offered on "Walmart To Go" are about in line with what Walmart charges at its hand full of stores in the San Jose area.

The everyday retail price-points for most items, particularly basics like milk and eggs and popular items like 12-packs of Coke, range from being slightly lower to about the same, and in a few cases I noticed higher, than those everyday prices the two leading supermarket chains in the market region - Safeway Stores, Inc. and Save Mart-owned Lucky Supermarkets - charge for like and similar items in their respective stores.

For example, "Walmart to Go" is selling a dozen of its private brand large-size eggs for $1.68, which is about the same as at the two chains mentioned above do for their best-priced private label versions.

Other grocers and discount format stores in the area sell similar quality eggs for less than $1.68, while other grocers retail the item for more than $1.68.

Eggs, particularly large-size, are also regularly advertised by grocer's in the region, just as is the case in other parts of the country.

As an example, Save Mart has its Sunnyside Farms private brand large eggs on sale this week at its Save Mart and Lucky banner supermarkets at buy-one-get-on-free (BOGO). At that promotional price, the cost per-dozen comes out lower than $1.68. But it is a promotional rather than an everyday price.

Walmart's private label fluid milk is selling for $2.41 on the "Walmart To Go" site. That's considerably lower, for example, than what Safeway is currently retailing its Dairy Glen (the lowest-priced of its private label fluid milk brands) fluid milk for. As of today, Safeway is selling a gallon of the Dairy Glen milk for $2.89, and to get that price shoppers are required to purchase a minimum of two gallons.

Other retailers in the San Jose area sell similar gallons of milk for less than $2.89. However, at $2.41, the "Walmart To Go" price-point is among the lowest I've seen when doing price checks in the area.

Lastly, Coca Cola, in the popular 12-pack cans size (Classic, Diet, ect.), sells for $4.38 on the "Walmart to Go" site. That price is about the same as what the two chains and many other grocery stores in the region offer the popular soft drink variety for on an everyday price basis.

Like eggs, 12-packs of Coke are an item promoted and advertised regularly by grocers and other format retail stores. In fact, it's hard not to find one or more retailers in any given market in the U.S. that aren't advertising 12-packs of Coke at least two, and often three, weeks out of a month, particularly in spring and summer.

For example, Raley's Supermarkets, which operates stores under the Raley's and Nob Hill Foods banners in and around the San Jose region, is currently promoting the Coke SKU in its weekly advertising circular for $2.25, based on a minimum customer purchase of four 12-packs.

Eggs, fluid milk and Coca-Cola are among the ten top-selling products or items in U.S. grocery stores.

Safeway Stores is the market share leader in the San Francisco Bay Area, followed by Save Mart and Raley's.

Safeway Store's operates the only major online ordering-based grocery home delivery service in the San Francisco Bay Area. Safeway's delivery area includes San Jose.

Therefore, at least in the parts of San Jose where Walmart is delivering groceries to residences, Safeway will have a new competitor - "Walmart To Go" - although at present the assortment of products Walmart has available to online shoppers on the website doesn't come close to matching the assortment Safeway offers on Safeway.com. But Walmart can add items to its selection easily, which I suspect it will. It's just launched the service as a "limited test," after all.

A few things about "Walmart To Go ... before I go.

First, I like the name. It's short. It's descriptive. And it fits well with Walmart's emerging multi-channel (brick-and-mortar and online), multi- (brick-and-mortar) format food and grocery retailing strategy.

Under the new strategy, there's the supercenters -  the big guys, and the lead horse of the brick-and-mortar store pack.

Next is "Walmart Market", the name Walmart is changing all of its Neighborhood Market supermarkets to, as well as what it will call its new grocery markets in the about 30,000-60,000 square-foot range.

Lastly, there's the smaller guy, "Walmart Express," the name of its new convenience format grocery stores, which will be about 15,000 square-feet.

I think "Walmart To Go," as a name, fits nicely in that mix.

[There's also "Walmart on Campus," the retailer's tiny (about 3,000 square-foot) convenience store on the University of Arkansas campus. But it's really a one-store test for now. So I don't include it yet in the overall multi-channel/multi-format strategy.]

In terms of my lack of enthusiasm for a Walmart home grocery delivery service in San Jose - and it's limited to that region, by the way, as I look at each market region as unique and see some strong potential for such a service by Walmart in other parts of the country - as expressed in my April 7, column, it's still my analysis that from a sales standpoint, at least in the near-to-medium term, a Walmart grocery home delivery service in San Jose, and in most if not all parts of the Bay Area, isn't going to be much to write home about.

However, I like that Walmart is testing it.

And they are testing it in a smart way - just like they did with the "marketside by Walmart" small-format stores in metro Phoenix, Arizona (although I would have tested the stores in the San Francisco Bay Area and in urban parts of Southern California, for example, as I've said before) - which is to start with a very limited test, in this case the city of San Jose, and then see what happens. The investment is low, particularly for Walmart, and as such if the retailer decides not to go forward and expand the service, the loss will be moderate.

I also think in a longer-term sense a grocery home delivery service operated in certain parts of the U.S. could fit well within what is a growing and emerging online business at Walmart Stores.

Walmart's ASDA chain in the United Kingdom has a grocery home delivery service, so the concept isn't completely new to the chain. In fact, Walmart has transferred one or more executives from the UK operation to work on "Walmart To Go." The U.S. and the UK, where online-based grocery home delivery is much more popular, are very different animals though when it comes to the business.

The retailer is planning some interesting new developments online, including experimenting with using social media to help it improve the performance of its online shopping offering in a much more aggressive way than it is currently doing. If things go according to its plans, Walmart Stores will become a much more dominant online retailing force in the U.S. over the next couple years than it is at present.

On April 18, Walmart announced it has signed a definitive agreement to acquire Mountain View, California-based social media company Kosmix, which "has developed a social media technology platform that filters and organizes content in social networks to connect people with real-time information that matters to them," according to its two founders, Venky Harinarayan and Anand Rajaraman.

The two founders, whose first company, Junglee, was acquired by Amazon.com in 1998, have been involved in the social media space for a number of years, focusing on ways to better integrate social media with online shopping.

Harinarayan and Rajaramen, along with members of the team they assembled at Kosmix, are going to work for Walmart and will be part of a newly formed research and development operation the retailer has created in Silicon Valley, called @WalmartLabs.

Walmart says "it plans to expand the @WalmartLabs team and expects the new group will create technologies and businesses around social and mobile commerce that will support Walmart’s global multi-channel strategy, which integrates the shopping experience between bricks and mortar stores and e-commerce."

The @WalmartLabs operation is part of the retailer's Walmart.com division, which is based in Brisbane, a small city next door to San Francisco.

Mountain View, where Kosmix was based, is a 30-45 minute drive from Brisbane and less than 10 miles from San Jose. San Jose is under an hour's drive from the Walmart.com offices in Brisbane, depending on traffic conditions, of course.

I included the travelogue paragraph above in order to highlight the geographical - and human resource - synergies behind Walmart's launching the grocery home delivery service in San Jose, acquiring the Mountain View-based social media-based company, and setting up @WalmartLabs in Silicon Valley, which San Jose and Mountain View are part of.

From the human resource and talent angle, The San Jose -to- San Francisco geographical region is home to, among other top-flight social media companies (and start ups), Facebook (Palo Alto) and Twitter (San Francisco). It also has the human resource talent and infrastructure Walmart needs to become a leader in online shopping and in using social media to help it achieve that objective.

Walmart should be given credit for making the synergistic  moves. (I just don't think, in my experience and analysis, "Walmart To Go" will be very popular in San Jose from a sales perspective. But I could be dead wrong)

In addition to creating an e-commerce/social media research and development center, @WalmartLabs, putting the operation in Silicon Valley gives the retailer an added presence, along with having its Walmart.com facility there, in the Bay Area, where it plans to do all it can to become a serious player in food and grocery retailing over the next few years. And testing "Walmart To Go' in nearby San Jose does allow for the operation to be nearby both Walmart.com and the new @WalmartLabs start up.

According to my sources, the retailer is also looking at possibly testing "Walmart To Go" in at least one other part of the country, and perhaps even two regions. But for the immediate-term, my sources tell me, the focus will be on the limited test in San Jose, where Walmart wants to "find a way" to sell more groceries, and hopes one of those ways is through "Walmart To Go."

I will have more to say about "Walmart To Go" in a upcoming column, including hopefully some evaluations by one or two people who've tried the online ordering and home delivery service. Stay tuned.

- The Insider

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