You would think that if you were a product manager at one of the world’s largest retail companies, getting into a new line of business would not be all that hard to do. I mean your company has deep pockets and can probably spend a lot of money to do whatever everyone else in this new market is doing. The result isn’t if you are going to be successful, it’s really more a question of just how successful you are going to be. As Walmart has gotten into the home grocery delivery business, their product managers have discovered that even being big may not be enough to ensure that they will be a success.
Walmart Discovers The Challenge Of Food Delivery
The product managers at Walmart were caught off guard after they began offering to deliver fresh groceries from a store in North Bergen, N.J. only to find orders flooding in from across the Hudson River. Drivers from DoorDash Inc. balked at paying the usual $15 toll that it costs to cross into Manhattan. Some orders were never filled. What the product managers had not intended to do was to include Manhattan within their delivery radius. The way that they chose to handle this situation was to offer additional incentive to drivers to finish the orders that came in and then stopped offering deliveries to Manhattan after a few days.
This mistake shows the hurdles Walmart and other large grocers face as they race to expand fresh-food delivery and gain an edge in one of the fastest-growing e-commerce segments. Despite Walmart’s immense resources and more than 1.5 million U.S. workers, it mainly relies on a patchwork of independent companies to expand its delivery services as quickly, broadly and cheaply as possible. For the drivers at those delivery firms, the economics of shuttling Walmart’s and other grocers’ orders don’t always make good sense. Walmart, is the country’s biggest seller of groceries. Their product managers are facing pressure expand their product development definition and push forward in delivery because Amazon.com Inc., its chief competitor, is making inroads in grocery sales. Amazon bought Whole Food Market Inc. two years ago and is offering same-day grocery delivery from the chain in more and more cities. Amazon also has plans to open a new chain of smaller physical grocery stores.
Taking a different path, Walmart entered the grocery business with the opening of its first supercenter in 1988, setting it on a path to becoming the world’s largest retailer by revenue. Walmart generated over $200 billion in U.S. grocery sales last year. Clearly that would look good on anyone’s product manager resume. This is more than double Kroger’s take and five times as much as Amazon’s in the sector. Online orders were just 7% of all U.S. grocery sales last year but are expected to double over the next five years. The Walmart product managers believe that maintaining a grip on grocery purchases as spending shifts online is vital to heading off Amazon. This is one of the few areas where Walmart has a head start over Amazon
Doing A Better Job Of Delivering Food
Walmart wants to get better at delivering food. In recent years, the Walmart product managers have added a service for placing online grocery orders for parking-lot pickup at more than 2,100 of its 4,650 U.S. stores. About 35,000 U.S. Walmart employees are called “pickers” and now weave through aisles compiling online grocery orders. Walmart is currently offering delivery from 800 stores, with another 800 planned this year. They have been able to do this mostly by joining with firms like DoorDash that crowdsource drivers. Walmart pays a fee to the companies who provide the drivers and charges customers $7.95 to $9.95 per grocery order to offset that cost.
It turns out that filling online orders with store workers winding through aisles organized for shoppers can be complex and expensive. Just to make things a bit trickier, drivers for delivery firms need an incentive to lug bulky grocery orders from their cars to customers’ doorsteps. The grocery drivers want to earn at least $10 per delivery and make multiple deliveries per hour. Walmart isn’t hearing the drivers’ concerns firsthand and isn’t directly exposed to driver issues. The product managers view their agreement with the delivery firms as being a contract negotiation for cost. The delivery firms handle driver recruitment and retention. The Walmart product managers are testing using their own store workers to make deliveries in a few locations. Late last year, they began arming workers with devices that tell them the fastest route through stores and the optimal order to place items into bags. The Walmart product managers have also started fining suppliers for incomplete deliveries, since filling online orders requires store shelves to be stocked as expected.
The product managers are looking at future remodels to tweak stores to better accommodate online ordering. Meanwhile, their Walmart pickers clog some aisles in stores. On certain days, it can be difficult for shoppers to get up and down the aisles. The Walmart product managers are also considering automation as well as limiting the number of online orders some stores take. The product managers realize that they don’t want to disadvantage their most profitable customer – the one who drives to the store and does all the work themselves.
What All Of This Means For You
In the upside down world that we all now find ourselves living in, the ability to have groceries delivered to our homes has taken on a new level of importance. The product managers at Walmart understand this and so they have looked at their product manager job description and launched a new service to get groceries from their stories and into people’s homes. However, what might have seen like a simple thing to do has turned out to be much more complicated than they originally thought.
When the Walmart product managers first started to offer their grocery delivery service, they were surprised when people on the other side of an expensive toll bridge started to place orders. They had not planned on this. The people who deliver the food do not work directly for Walmart. Walmart feels the need to start to offer this service in order to compete with Amazon. Walmart is the largest seller of grocery products. Amazon purchased Whole Foods in order to enter the business. Walmart has created food pick up locations in their parking lots, they have turned employees into “pickers” to select groceries for home delivery, and they pay drivers to deliver the food. Having the pickers in the stores can cause congestion. Walmart has equipped their pickers with electronics so that they can find food quicker. In the future stores may be remodeled to help with online ordering.
The Walmart product managers have to get good at delivering groceries to their customers. This new service is proving to be very popular and if they don’t step up, then their competition, most notably Amazon, will rush in and take this market away from them. However, entering into this market is proving to have its own set of challenges. These can be solved. However, the Walmart product managers are going to have to listen to their customers and then find ways to solve the challenges that they are facing. If they can do this, then going to Walmart to pick up groceries may become a thing of the past.
– Dr. Jim Anderson
Blue Elephant Consulting –
Your Source For Real World Product Management Skills™
Question For You: Do you think that Walmart should hire their own drivers to deliver groceries to their customers?
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What We’ll Be Talking About Next Time
If you were the product manager for a new social media app, what would your #1 goal be every day when you went to work? There is only one answer to that question: to sign up more users for you app. Social media is all about growth. There are a number of new social media apps that are being created by Chinese companies (who else would know about what appeals to millions of people?) and they think that they may have found an untapped market. The product managers for these Chinese companies are going after users in India where there are millions of people just waiting to discover the next big social media app.