Walmart taps store associates for last-mile delivery program

Discount retail giant Walmart is testing a new last-mile delivery program that aims to cut shipping costs and improve delivery times in an effort to better compete against Amazon.

The program utilizes the retailer's existing store associates, giving employees the opportunity to earn extra income by delivering online orders on their way home from work. The pilot is spearheaded by Marc Lore, chief executive of Walmart US e-commerce, who joined the retailer following its $3 billion acquisition of Jet.com in 2016.

Workers "earn extra income on their existing drive home," Lore wrote in a blog post. "Once they're done working at the store for the day, they pick up the packages from the backroom, load them into their vehicle, enter the delivery addresses into the GPS on their phone and head toward home."

According to Lore, the program is a "special win-win-win for customers, associates and the business," and there's a strong chance he's right.

Walmart has 4,700 US stores, and 90 percent of the US population lives within 10 miles of its brick-and-mortar locations. That gives Walmart a tremendous advantage to implement an order fulfillment strategy that optimizes the power of its physical presence.

The program also helps Walmart innovate a key area of customer demand and combat a competitive disadvantage versus Amazon's delivery options while also expanding the role of the traditional retail worker -- all of which makes a lot of sense in today's uncertain retail landscape.

"For Walmart to have the ability to map packages that are on their employees' routes home and allow their team members to pick up extra wages is a good employee retention measure as well as a potential same-day delivery solution," said Sarah Engel, CMO of retail analytics firm DynamicAction. "There would be all sorts of obvious challenges to this model, if it was the sole solution for same day or next day delivery. But, as one of an arsenal of solutions, it's a very interesting test."

At this point the program is available in two New Jersey stores and one store in Northwest Arkansas. Associates opt-in to participate as drivers, and use technology that Lore says lets workers set preferences for how many packages they want to deliver, weight limits for the packages, and which days they're available to make deliveries. The technology also aims to allocate packages in a way that minimizes the collective distance workers must travel off of their commute to make a delivery.

Looking at the bigger picture, the last-mile delivery program is an extension of Lore's "basket economics" strategy used within Jet.com. Simply put, basket economics is an e-commerce ops strategy that stresses logistics and supply chain to reduce costs. The idea is to figure out the optimal way to ship a basket of goods to a consumer, at the lowest cost, and to make that process transparent to the consumer as they're shopping. Jet turned this into an algorithm that powers its Smart Cart digital shopping cart.

In April, Walmart launched the basket economics-inspired Pickup Discount service, which offers customers reduced prices on online-only items if they opt to pick up their orders in-store. By all accounts, Pickup Discount is yet another way for Walmart to cut down on last-mile delivery costs, which tend to be the most expensive part of online order fulfillment.

Walmart previously tested last-mile delivery via partnerships with Uber, Lyft, and Deliv, with no significant results. Now, Walmart is eyeing last-mile deliveries at scale.

While it's unclear how this latest effort will shake out, Walmart's e-commerce investments are showing results. The company's e-commerce sales soared by 63 percent in its most recent quarter.