Who's Going to Deliver Your Groceries: Walmart, Amazon, or ...?

Walmart delivery
Short on milk, toilet paper, lettuce, and pasta sauce? Relax. Your groceries will be delivered to your front door shortly -- and you might be surprised by the company logo on your delivery person's shirt.

Centralized grocery delivery makes a lot of sense. It saves shoppers more than just time and gas-money. Moving groceries from stores to multiple customers' refrigerators in the most fuel-efficient manner a computer can devise can cut carbon emissions by as much as 90 percent, compared to the way we ordinarily shop for our celery.

But enough about the environment and consumer convenience. More companies are getting behind grocery delivery because it makes good business sense as well.

Walmart Delivers

Over in the United Kingdom, for example, Walmart (WMT) owns a subsidiary called Asda that has rolled out the second-largest grocery delivery business in that nation. It's working so well for them that in the U.S., Walmart has begun testing a similar service in San Francisco and San Jose, Calif.

Using its existing big-box stores as ad hoc warehouse centers, the company's "Walmart To Go" service delivers groceries to surrounding locales, fulfilling orders placed on its website.

Having proven the concept (Walmart's been running its test program since 2011), the company's now biding its time before it rolls out the program in a big way.

As Walmart's Global e-Commerce President Neil Ashe recently explained, the concept isn't quite ready for prime time because the U.S doesn't have the quite the level of customer "density" that helped Walmart build a delivery service in the U.K.

So Walmart is waiting for its retailing rivals to blaze the trail and help popularize the grocery-delivery concept. After that, it won't be long before Walmart is delivering groceries to your front door.

Please, I insist! After you...

That time may not be far off.

Upscale supermarket Harris Teeter (HTSI) -- soon to be acquired by Kroger (KR) -- is doing its darnedest to get shoppers off the fence, over the hurdle of fearing high delivery costs, and onto the grocery delivery train.

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In contrast to more established grocery delivery services such as Peapod, which charges $6.95 and up (depending on the size of an order), and Walmart, which charges $5 and up , Harris' "Express Lane" charges just one flat rate of $4.95 per delivery -- no order too small.

Harris, of course, doesn't serve a whole lot of markets right now -- just eight states and the District of Columbia. So you really have to be in the vicinity of one of its few stores to use Express Lane.

In contrast, one retailer of similar size to Walmart now entering the home grocery delivery game is Amazon.com.

Customers Who Shopped for Tomatoes Also Bought ...

Last month, Amazon confirmed that it will soon expand its AmazonFresh grocery delivery service outside the company's home city of Seattle.

With five years' experience running a grocery delivery biz, and many more years than that honing its skills and building warehouses for delivery in general, Amazon thinks it's finally ready to start going head-to-head with the competition on .

The company launched AmazonFresh in Los Angeles just a few weeks ago, and could expand to San Francisco as early as later this year.

Next year, rumor has it, the company could take the rest of the country by storm -- opening AmazonFresh for business in as many as 20 other cities, and with plans to expand into another 20 soon after.

Why so fast, and why so big? It's simple, really. Amazon runs on operating margins of barely 1 percent -- one-sixth the size of Walmart's. As such, the company needs vast numbers of transactions to produce appreciable earnings from all those penny-on-the-dollar profits. Amazon does $64 billion in business a year already, but the grocery business in the U.S. is nearly nine times bigger than that -- $568 billion a year. It's tailor-made for a "we make it up on volume" company like Amazon.

As a bonus, added profits from grocery sales could help to finance the construction of more widely distributed warehouses around the country (which, since it's going to have to collect sales taxes everywhere soon, is clearly the way to go for Amazon). This, in turn, will shorten distances, improve delivery times, and lower delivery costs for the other products Amazon sells -- improving its advantages over rival online sellers like eBay (EBAY) and Overstock.com (OSTK).

In short, delivering groceries is a win-win business for Amazon -- and soon, it'll be a winning proposition for more grocery shoppers, too.

Motley Fool contributor Rich Smith has no position in any stocks mentioned, but he is looking forward to using AmazonFresh with Amazon Prime free delivery (fingers crossed). The Motley Fool recommends eBay. The Motley Fool owns shares of eBay.

18 Facts About Walmart That Will Blow Your Mind
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Who's Going to Deliver Your Groceries: Walmart, Amazon, or ...?

In fiscal year 2012, Walmart registered approximately $444 billion in sales, which is $20 billion more than Austria's GDP. If Walmart were a country, it would be the 26th largest economy in the world.

Photo: Wikimedia Commons, Andrew Bossi

Walmart has more employees worldwide — 2.2 million — than the population of Houston. The mega-retailer employs 1.4 million people in the U.S. alone.

Source: Walmart Corporate & Financial Fact Sheet

Photo: Flickr, jimmywayne

If Walmart were an army, it would have the second largest military in the world, behind China.

Photo: Wikimedia Commons, BrokenSphere

Walmart is bigger than Home Depot, Kroger, Target, Sears, Costco, and K-Mart combined.

Source: Seeking Alpha

Photo: Flickr, Kevin Dooley

The average family of four spends over $4,000 a year at Walmart.

Source: Otherwords.org

Each week, Walmart serves more than 200 million customers at more than 10,400 stores in 27 countries.

Source: Walmart Corporate & Financial Fact Sheet

One of every four dollars Americans spend on groceries is spent at Walmart.

Source: Otherwords.org

Photo: Flickr, G.e.o.r.g.e

In 2010, CEO Michael Duke's annual salary of $35 million earned him more in an hour than a full-time employee makes in an entire year.

Source: ABC News

In 2009, Walmart sold more bananas than any other item.

Source: Bloomberg

Photo: Flickr, PinkMoose

China's exports to Walmart accounted for 11 percent of the growth of the total U.S. trade deficit with China between 2001 and 2006.

Source: Economic Policy Institute

Photo: Wikimedia Commons, Agnieszka Bojczuk

If Walmart's more than 900 million square feet of retail space were spread out over one place it would take up roughly 34 square miles, which is about 1.5 times the size of Manhattan.

Photo: Wikimedia Commons: Daniel Schwen

Walmart parking lots alone take up an area roughly the size of Tampa, Florida.

Source: Walmart Watch

Photo: Wikimedia Commons: Wt90401

In 2000, Walmart was sued 4,851 times, or about once every 2 hours.

Source: USA Today

Photo: Wikimedia Commons, maveric2003

90 percent of all Americans live within 15 miles of a Walmart.

Source: Business Pundit

The Walton family has given away about 2 percent of its net worth to charity — Bill Gates is giving away 48 percent of his net worth and Warren Buffet 78 percent of his net worth.

Source: Business Pundit

An additional Walmart Supercenter per 100,000 residents increases average BMI (body mass index) by 0.25 units and the obesity rate by 2.4 percent.

Source: SSRN

The most frequent destination typed into GPS device Telenav is Walmart.

Source: Wireless and Mobile News

Photo: Wikimedia Commons, Attitude2000

Roughly 4,700 (about 90 percent) of international stores operate under a banner other than Walmart, including Walmex in Mexico, Asda in the UK, Seiyu in Japan, and Best Price in India.

Source: Walmart Corporate & Financial Fact Sheet


Update: A previous version of this article noted that Harris Teeter was being pursued for acquisition by private equity firm Cerberus Capital. News broke later that the grocer will be purchased by Kroger.
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