The U.S. restaurant delivery landscape seemed pretty well set. DoorDash, Uber Eats, and Grubhub have spent years absorbing smaller rivals and carving out their corners of the market, leaving little room for another major player.
Walmart, apparently, feels differently.
The world’s largest retailer on Thursday unveiled plans for an aggressive push into restaurant delivery, using its huge store footprint and large and growing delivery network to reach both restaurants and consumers.
It will start close to home, with the 1,400 Subways and 150 Dunkin’ locations inside of its stores. But it plans to expand the service to “the majority” of the 10,000 or so Dunkin’s that are not inside a Walmart, as well as other restaurants.
In a press release on Thursday, the chain did not mince words about its ambitions: “With its growing delivery speed capabilities and offerings, Walmart is a rapidly emerging contender in the restaurant delivery business,” it said. (Emphasis mine.)
OK then!
While this is somewhat unexpected, Walmart is probably one of the only companies that could realistically try to get into the food delivery game at this stage.
It is big enough: There are more than 4,000 Walmarts across the U.S., in all 50 states, which double as delivery fulfillment hubs. According to the company, 90% of the U.S. population is located within 10 miles of a Walmart. There must be an awful lot of restaurants in those 10-mile radii as well.
Walmart also has a large delivery network. It began testing grocery delivery in 2016 and took it nationwide two years later. In 2020, it launched Express Delivery, promising orders in two hours or less. And then in May, it introduced an even faster option — 30-minute delivery — in 33 markets.
Walmart deliveries are largely handled by Spark, a dedicated network of gig workers that operates much like other delivery apps. Independent contractors can select trips at their leisure and earn money per order, plus tips.
It’s not clear just how big Walmart’s delivery business is. The company’s U.S. stores generated $125.2 billion in total sales last quarter, and ecommerce made up 23% of that, or more than $28 billion. Delivery is a piece of the larger ecommerce business. But it is growing rapidly.
Last quarter, store-fulfilled delivery sales — meaning orders handled by stores and not warehouses — increased by 43% year over year. Sub-three-hour deliveries accounted for 37% of those orders. And on an earnings call, CFO John Rainey said Walmart can now reach 60% of the population in 30 minutes or less.
Walmart’s inventory is vast, ranging from groceries (it’s the nation’s largest grocer) to clothing, electronics, and tires. Add in restaurants — which will be no small feat — and its selection would rival that of DoorDash, Uber Eats, or Grubhub.
But even if it’s able to do that, how different is Walmart, really, than those other apps? They are already used by millions of consumers to not only order from restaurants but also many other places, including Walmart itself, which is available on DoorDash and Uber Eats. They have been growing quickly and are showing no signs of slowing down.
One big advantage: Walmart can offer customers more of a true one-stop shop, at least for now. Customers can browse the whole inventory, including in-store restaurants, in one screen, with one cart, and have everything delivered together. This is not always the case with food delivery apps, which may require customers to create two carts to order food from a restaurant and a grocery store at the same time.
The big caveat, of course, is that as of now, Walmart only offers delivery from Subway and Dunkin’, and only in certain markets.
Price is another factor, and with Walmart, that all depends on what you’re ordering.
A standard Walmart delivery comes with a $9.95 delivery fee. But that fee is waived for Walmart+ members. Walmart+ costs $12.95 a month or $98 a year.
That means a Walmart+ member could order groceries, a few household items, and a sub from Subway, without a fee, for standard delivery. But it would take a couple hours to arrive, so it doesn’t make as much sense for a restaurant delivery occasion.
A Walmart+ member could make the same order with Express Delivery to get it in 30 minutes or less. That will cost them an additional $10. But they’re killing multiple birds with one stone by getting a meal for now and other stuff for later in a single transaction. That may be worth the fee.
This seems to be the use case Walmart is hoping for, and for good reason: It means a bigger ticket, which is more profitable for the company. According to Walmart, since launching Subway delivery, 65% of restaurant orders included other items from Walmart. It also said restaurant delivery is introducing more customers to Express Delivery.
Notably, Walmart charges a different fee for restaurant-only deliveries, a flat $5, with the order fulfilled ASAP. It also does not mark up menu prices for its in-store restaurants.
This translates to a pretty good deal for customers. In the Milwaukee market, a Footlong turkey sub from Walmart/Subway, for delivery, costs $16.77 before tip. The same order on DoorDash costs $20.42, and on Uber Eats, $20.64.
So, Walmart has a few advantages over other food delivery apps. It makes it easier for customers to order multiple different items at once, and can offer better prices, at least from in-store restaurants. But right now, it doesn’t have anywhere close to the restaurant selection of the existing delivery apps, and can hardly be viewed as a real restaurant delivery destination.
That could change as it expands delivery to other restaurants. But doing so will also introduce new challenges. Delivering food, especially from multiple locations, is complex and labor-intensive, and therefore costly. Walmart may not be able to prevent its external restaurant partners from marking up prices to cover the costs of delivery, for instance. And it may be hard-pressed to meet those 30-minute delivery times when couriers have to make multiple stops. There will also be major costs involved with building out a large restaurant marketplace, if that is what it intends to do.
Walmart could easily just limit delivery to the restaurants located within its stores, giving it a nice, incremental sales boost and keeping things simple operationally. But it appears to be going after a much larger piece of the delivery pie. It's a bold move, to say the least.
Regardless, restaurants should be intrigued: More competition in the delivery market is never a bad thing. It could mean lower commissions and better service, not to mention a new partner with a massive audience. An astounding 280 million people visit Walmart’s stores and websites globally every week, according to the company. A few of them just might like a fresh meal to go with their groceries, batteries, and Halloween decorations.