Pickup with Fuel Isn't Just About Going Small Or Digital

Home , Asda

Wal-Mart’s Multi format Gamble Pickup With Fuel isn’t just about going small or digital— it’s a sign of our omnichannel future

BY SAMANTHA OLLER, GREG LINDENBERG AND STEVE HOLTZ

32 csp March 2017 March 2017 csp 33 wise man once said, “Most large He countered Click-and-Collect, Step by Step organizations embrace the idea of that claim with Wal-Mart’s pickup service combines online ordering with outdoor kiosks to maintain a smooth flow invention, but are not willing to suffer the Amazon Go, for customers. Here’s how it works: string of failed experiments necessary to an 1,800-square-foot get there.” ¶ That man, Jeff Bezos, c-store that offers founder, chairman and CEO of Amazon, food, grocery and has a name synonymous with retail the ability to pay 1 Create an online disruption. He poses his company’s “outsized returns”— without a checkout account and place your order, anything $107 billion in sales, according to Forbes—as the result of betting line, currently in from fruits and vegetables to shoes against conventional wisdom. ¶ Most recently, this includes the idea test in Seattle [CSP— or a lawnmower. Pay online and that an e-commerce retailer doesn’t translate into brick and mortar. Feb. ’17, p. 28]. reserve a time slot for pickup.

or traditional brick-and-mortar retailers, news of Amazon A Small-Format Tour Go—and rumors of 2,000 oth- Jan. 2011 er small-format stores in the Wal-Mart has a history of Wal-Mart on Campus works—must feel reminiscent of tinkering with formats to meet Size: 2,500-4,100 square feet that famous scene from the horror 2 competitive threats, whether Description: Traditional film “The Ring,” when the malev- Pull up to a kiosk at it be discount supermarkets neighborhood c-store on or near a olent long-haired girl climbs out the Wal-Mart Pickup such as Aldi and Trader Joe’s, college campus, without fuel of the TV. Not only is Amazon With Fuel store at or online interlopers such Status: Five stores defining the shopping experience the appropriate time, as Amazon. online—and resetting customers’ then enter your name expectations along the way—but or order number into March 2011 now it’s attempting to do so on the kiosk. You’ll be Wal-Mart Express the street. And with each move, directed to one Size: 10,000-15,000 square feet it is driving to become the truest of three pickup bays. 1998 Description: Small-format stores convenience retailer, meeting Wal-Mart Neighborhood Market offering groceries and limited consumers wherever they want Size: 38,000-45,000 square feet assortment of merchandise, some to buy and with the fastest transaction. Description: Medium-format stores with fuel The retailer has more than “There have been retailers in the past offering groceries, some with small, Status: All 102 stores closed 650 Neighborhood Market that have tried to steer consumers into cer- freestanding c-stores with fuel and sold or converted; format locations in 31 states. Ftain solutions that were easier and more Status: More than 650 stores in discontinued profitable to execute,” says Carol Spieck- 3 31 states erman, president of Spieckerman Retail, a Your order will Bentonville, Ark.-based retail consultancy. be delivered and 2014 April 2016 Amazon has blown this up by deferring to loaded into your 2008 Wal-Mart to Go Wal-Mart Pickup With Fuel the consumer. “Now [retailers are] realiz- car by a Wal-Mart Wal-Mart Marketside Size: 5,200 square feet Size: 4,000 square feet ing if they don’t offer convenient choices, associate within Size: 16,000 square feet Description: Traditional c-store Description: C-stores and online they can be left behind or shoppers will go a five-minute Description: Medium-format stores with fuel order pickup sites with fuel elsewhere.” window. (No tipping offering groceries Status: One store, Status: Two stores, in Madison, Ala., This includes the world’s largest retailer, allowed.) And you’re Status: Wal-Mart closed the four in Bentonville, Ark. and Thornton, Colo. Wal-Mart Stores Corp. With $482.1 billion in on your way. locations in October 2011. worldwide sales, the Bentonville, Ark.-based

34 csp march 2017 march 2017 csp 35 chain of 5,000 U.S. stores dwarfs Amazon in sheer size. But with only 2.8% share of THE FEARLESS e-commerce sales, according to eMarketer, Wal-Mart is a very distant second to Ama- TESTER zon online, which commands more than ezos may seem boldly willing to 74% share. fail, but Wal-Mart’s way ahead of And increasingly, when asked to choose him. It has cycled through more where to shop, consumers are picking on- than a half-dozen medium- and line—and they’re picking Amazon. small-format concepts in the past “[Amazon’s] taking trips out of shoppers’ two decades. It is quick to drop Clickbait portfolios,” says Laura Kennedy, director of those that fail to meet its goals— retail insights for Boston-based Kantar Re- such as Wal-Mart Marketside and tail. Half of Amazon Prime members shop Wal-Mart Express—and to invest with Amazon before another retailer, ac- in those that do, such as Wal- cording to Kantar Retail. And based on the Mart Neighborhood Market, with 76% firm’s penetration data, Amazon is about to more than 650 locations. (See Amount of shopping trips pass Wal-Mart as the most shopped retailer sidebar, p. 34.) that begin online in the United States. “Wal-Mart’s main challenge is that they It’s forcing Wal-Mart to question its dif- Bhave yet to come up with a model that pro- ferentiation, which can no longer be just vides the returns of a Supercenter. All of about everyday low price. “What is Wal- these efforts are part of this,” says Neil Mart’s unique role with shoppers?” Kenne- Stern, senior partner with retail consultancy dy says. McMillanDoolittle LLP, Chicago. This chal- 55% Of course, Wal-Mart did not get to be lenge has only grown as Wal-Mart’s efforts Amazon’s share of product the largest retailer in the world by playing it to expand Supercenters into urban markets searches on retail sites safe. To broaden its online presence, it has have met with fierce local resistance. “It is been acquiring e-commerce players such critical that they solve the puzzle of urban lo- as Jet.com and Shoebuy.com. And to make cations and nontraditional locations if they shopping more convenient, Wal-Mart has are to continue to find growth.” been expanding its buy online, pick up in- Ben Bienvenu, a research analyst for Ste- store (BOPIS) efforts, most recently with phens Inc., Little Rock, Ark., sees Wal-Mart 21% Wal-Mart Pickup With Fuel, a combination Pickup With Fuel as an outgrowth of the Amount of households in c-store, gas station and click-and-collect lo- chain’s February 2016 decision to end its 2015 that bought groceries online cation, currently in test. partnership with Murphy USA on new fuel- in the past 30 days As these two giants duke it out, other re- ing locations. Up until then, Murphy had built tailers need to be ready to learn, and to ride 1,100 gas stations on Wal-Mart Supercenter the wave. lots, with about 50 left to build. Wal-Mart has “Wal-Mart is in a very dynamic mode, about 200 of its own private-branded gas sta- and they’re making some big, big bets,” says tions today [CSP—May ’16, p. 28]. Spieckerman. “When Wal-Mart does that, it “Wal-Mart wanted to have flexibility,” 9% always creates disruption.” says Bienvenu. “They recognize fuel is es- Amount of North American sential to complete the basket and drive traf- respondents to Nielsen’s Connected fic and loyalty, and it has been a big success Commerce Survey who have factor for Kroger. So they’re trying to find the purchased fresh grocery online right balance.” “It’s got all the stuff Wal-Mart Pickup With Fuel’s very name suggests the retailer is making an effort you usually see to find a winning e-commerce/brick-and- in a [convenience mortar combination—and with it, satisfy the store], but they’ve modern consumer’s every desire. The com- 5.3% vs. 7.0% pany opened its first location in Madison, Wal-Mart customers who shopped maintained Ala., in April 2016, with the second following for groceries via a desktop or laptop in November in Thornton, Colo. computer within the past 30 days Wal-Mart prices. In a recent visit to the Colorado location, (September 2014 vs. January 2016) That’s huge.” CSP saw a c-store design as modern as any of Sources: IRI; Bricks to Clicks; Nielsen; Prosper Monthly Consumer Survey

march 2017 csp 37 during his visit, was won over. “This is the best idea Wal-Mart has ever done,” says customer Aaron Cherry. Living within a mile of the store, Cherry says he watched the construction of the site progress and was excited when he saw the Wal-Mart brand go on the store. “It’s the prices,” he says. “It’s got all the stuff you usually see in a [convenience store], but they’ve maintained Wal-Mart prices. That’s huge.” PICK IT UP ut what makes this concept different from the company’s earlier c-store concepts is the ability to Convenience plus big-box low prices: Wal-Mart’s new format may be a powerful combination. pick up orders from Walmart.com. The pickup area is defined by an orange canopied section and re- the best-known chains in the industry. The ter, with all sizes of fountain drinks and cof- served parking spaces at the side 4,000-square-foot store features the bold fee priced at 88 cents, a 20-ounce Gatorade of the store. (For a tour of Wal- Wal-Mart blue and gold color scheme, and at $1.68 and frozen burritos available for Mart Pickup With Fuel, see csp an open, lofty layout that puts foodservice 38 cents each. Private-label products such dailynews.com/walmart-pickup.) right near the front door. Colorful graphics as flavored sparkling waters for 50 cents Customers place an order— above the cooler and foodservice areas in- and 98-cent fresh doughnuts further drive including anything from grocer- vite customers to “Chill” and “Enjoy.” The home the value theme. At the eight-pump ies to TVs—at Walmart.com and select the store capitalizes on Wal-Mart’s price-match- fuel island, signage promotes foodservice Wal-Mart Pickup With Fuel site for pickup. ing policy, which guarantees the lowest price offerings such as $3.98 salads, sandwiches BPersonal shoppers at the nearby Wal-Mart or else it will match the competition’s. and wraps, and $1.28 roller-grill products. Supercenter fill the orders, which are placed The low-price promise is front and cen- At least one customer, who spoke to CSP into delivery trucks (refrigerated if necessary) to send to the c-store three times per day. Customers get a phone call when their order TOE TO TOE is ready for pickup. The service is free and is available from 8 a.m. to 8 p.m. (The c-store is Wal-Mart vs. Amazon in 2016 open from 5 a.m. to 11 p.m.) Gina Kretoski, e-commerce market coach for Wal-Mart, says combining grocery pickup with c-stores was an obvious move for the retailer. “Customers are evolving and grocery Headquarters Bentonville, Ark. Seattle is evolving,” she tells CSP. “Anything we can do to improve work-life balance, we’ll try it.” U.S. store count 4,574 4 This is not Wal-Mart’s first foray into BO- PIS; its Asda division in the United Kingdom has offered a click-and-collect service for Global head count 2.2 million 222,400 the past few years at its locations, including c-stores. But the American consumer is just Total sales $482.1 billion $107 billion* becoming comfortable with the concept. Previously a store manager in Colorado, Kretoski in 2013 led one of the first Super- E-commerce sales $13.5 billion $79.3 billion centers to offer online ordering and pickup. Colorado would go on to be Wal-Mart’s Share of total global e-commerce sales 2.8% 74% biggest market for BOPIS, with 40 stores offering the service. Providing it in a c-store Sources: Company financial reports; Forbes; eMarketer * 2015 figures; 2016 numbers not available at press time

march 2017 csp 39 format is an attempt to further amplify the convenience aspect. “Wal-Mart basically piloted online ordering in Colorado, so this is something customers in this area are accustomed to,” Kretoski says. “Building a convenience store that serves that purpose is just one more step to move the pickup closer to customers’ homes.” In Alabama, where the first Wal-Mart Pickup With Fuel opened, at least one c-store retailer is circumspect about the site’s chances. J. Spencer is CEO of The Spencer Cos. Inc., Huntsville, Ala., which operates 31 c-stores under the MinitMan name. He de- scribes his market as one of the fastest-grow- ing in the state. The local Wal-Mart Pickup With Fuel is located halfway between two Wal-Mart Supercenters, where traffic on Since ending its fuel partnership with Murphy USA, Wal-Mart has been in an experimental mood. the nearby highway is “incredibly stagnant” during rush hour. The new concept may give drivers a way that not everything can be perfectly executed to buy groceries from Wal-Mart without hav- MULTIFORMAT and all potentials realized in a single channel, ing to fight traffic to the Supercenters, nei- even if that channel is digital.” ther of which have fuel, Spencer says. “I have FUTURE For c-store retailers watching these two heard many women state they like being ennedy considers Wal-Mart Pick- behemoths’ moves into multiple channels, able to pull up and have the groceries load- up With Fuel a sign that the retail- consider it not so much a competitive threat ed into the car without shopping,” he says. er is willing to test and learn—and as an opportunity to learn and innovate. But Spencer does not expect Wal-Mart it would likely agree. “If Wal-Mart were to open 2,000 Pickup to build large numbers of the stores because Wal-Mart executives are quick With Fuel locations, sure it could be a threat of the reliance on Supercenters for supply. to emphasize that Pickup With to c-stores. But I find that extremely unlike- Wal-Mart has more than 3,400 across the Fuel sites are strictly ways to de- ly,” says Kennedy. She also believes c-stores country. “I doubt they can support too many termine the best way to serve can teach the retail behemoth a thing or two. destinations this way,” he says. customers as it evolves into a mul- “Wal-Mart has a lot to learn … about the “I wouldn’t get too excited about them,” tiformat retailer. kinds of things people look for on a quick says Kennedy of Kantar Retail, pointing out “We are testing different trip,” she says. “Wal-Mart is moving ahead that two stores among Wal-Mart’s 5,000 is things with the goal of providing on this initiative, but it’s not like c-stores are “a drop in the bucket.” customers convenient ways of getting what standing pat.” “This is a retailer geared to drive big they need, how and when they want to get Spieckerman urges c-stores to take a page trucks of big pallets to big stores,” she says. Kit,” says spokesperson Anne Hatfield. “This from retailers such as 7-Eleven and Plaid “Everything they’re doing now”—home holds true for everything we do, be it online, Pantry and partner with an online retailer delivery, small formats and click-and-col- mobile, large stores, smaller stores or con- such as Amazon or Wal-Mart by offering lect—“it’s really all in service to figuring out venience offerings. We are listening to our pickup points for their orders. “C-store oper- how to do it.” customers and driving value to them.” ators don’t have online business or relevance; She would not comment on Amazon Go, they’re truly there for physical convenience,” except to say “competition is good because she says. “But many have tremendous scale. it makes us all better, and in the end, the cus- “Wal-Mart’s Pickup With Fuel concept is tomer wins.” a signal for them to explore this,” she contin- “Wal-Mart [has] Amazon, as much as it seems to be in the ues. “Even if they don’t have their own online driver’s seat, is also trying to figure out this operations or a compelling proposition on- yet to come up with evolution from single-format to multiformat, line, they can absolutely partner with those a model that says Spieckerman. “When Amazon opens who do.” stores, people tend to portray it as them en- Or, to take advice from Bezos of Amazon, provides the returns croaching and being innovative,” she says. “Given a 10% chance of a 100 times payoff, of a Supercenter.” “But you can also look at it as their realization you should take that bet every time.”

40 csp March 2017