The Supply Side: Walmart focused on faster deliveries

Two-day delivery used to be table stakes for retailers just a few years ago. But times have changed, and consumers want products faster and faster, according to David Guggina, chief e-commerce officer at Walmart. His area is responsible for the U.S. e-commerce strategy and execution.

Guggina has been in the role since January, but he spent his first three years at Walmart in the supply chain, where he oversaw innovation and automation. He also logged nine years at Amazon and nearly three years at Anheuser-Busch.

“If you think about my experiences, mostly supply chain and manufacturing, but a lot of experience in fulfillment, distribution, first, middle and last mile, I’ve held roles that have both designed automation, the hardware as well as designed the software that powers supply chains, so warehouse management systems, control systems, as well as transportation management systems,” Guggina said recently at the Goldman Sachs Communacopia + Technology Conference in San Francisco.

Walmart’s e-commerce business accounts for about 20% of its sales today and over the past five years. Guggina said there’s plenty of room for growth. In China, e-commerce accounts for half of sales. In the recent quarter, Walmart’s U.S. e-commerce sales grew 26% from a year ago and are up 48% over the past two years.

Guggina said growth is the culmination of Walmart’s focus on online pickup and delivery, which started with groceries and has now expanded to everything inside a supercenter. But Walmart did not stop there. Guggina said Walmart continues to develop ways to connect supercenters and neighborhood market stores to its upstream supply chain in ways that will result in a better customer experience.

“We are focused on fast delivery,” Guggina said. “Customers love fast delivery, and it has been a game-changer for our business in recent times. Then we invested in our marketplace a few years ago, and that has helped deepen our assortment for our customers who also want great prices and great value.”

He said to understand how Walmart plans to deliver faster service to customers, it’s important to consider that besides being a retailer, Walmart also is a forward-deployed fulfillment network with its 4,700 U.S. stores.

“Today, we can deliver to 94% of U.S. households in three hours or less,” he said. “By the end of the year, we’re going to expand that to 95% of U.S. households. Then there is our scheduled delivery, which is a large portion of our business. About a third of them are fast; the fastest is three hours or less. About 25% of those fast deliveries are now delivered in 30 minutes or less.”

He said faster delivery can be a big advantage when products are in huge demand. Nintendo launched its new Nintendo Switch 2, and Walmart obtained enough inventory that it was made available on its mobile app. Guggina said it sold out in minutes, but one of the key differentiators was that Walmart promised to deliver those Nintendo systems to customers by 9 a.m. on the day of launch.

“You have to have thousands of forward-deployed fulfillment nodes to be able to bring that to life,” Guggina said. “I’m happy to say we did that. Most of them were delivered by 7 a.m. Customers also got a bonus of chips and soda from us to show them that Walmart can deliver electronics more incredibly quickly to their doorstep or to their home. Many of these orders were from first-time customers of Walmart, who weren’t as familiar with these speed capabilities that we have.”

Consumers do expect faster deliveries, which prompted Walmart to launch its 90-minutes-or-less option at the beginning of the year. Walmart is now promising faster times.

“If we promise a delivery in 23 minutes, then we can get it to the customer’s doorstep in 23 minutes,” he said. “That’s our promise. What we’ve learned is that when customers utilize fast delivery, their frequency starts to increase and their basket starts looking different.”

Customers may start with groceries, but Walmart sees fast delivery reaching into general merchandise, fashion and home goods. Guggina said the retailer has seen larger baskets with faster delivery — about 13% larger than normal, scheduled or non-fast delivery.

“Customers who use fast delivery spend two times more than the average digital customer,” he said. “Customers who have utilized fast delivery four or more times spend three times more than our average digital customer, which is absolutely fantastic to see, and we’re going to continue to lean into the space.”

Walmart has invested billions into its supply chain capabilities to aid in faster fulfillment and added efficiency to the company’s profitability. In addition to the vast network of stores, there are import distribution centers, regional distribution centers, perishable distribution centers, inbound consolidation centers and e-commerce fulfillment centers.

Guggina said the high-speed fulfillment centers are by far the most productive. He said the new fulfillment centers can hold millions of items because they have millions of cubic feet of space. He said they’re about twice as productive as a legacy fulfillment center, and they’re becoming more capable with the use of robotics and other automation.

“We are going to make more and more items available for faster delivery to our customers,” Guggina said. “Three days will become two, and two days will turn into the next day, then the same day. More and more items will be offered at ultra-fast speeds, and that’s incredibly exciting.”

Another reason Walmart is focusing on faster deliveries is because consumers are willing to pay additional fees for the expedited service.

Editor’s note: The Supply Side section^[1] of Talk Business & Politics focuses on the companies, organizations, issues and individuals engaged in providing products and services to retailers. The Supply Side is managed by Talk Business & Politics, and is sponsored by HRG^[2].

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