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Having initially started working together in February, Sam’s Club and Instacart are expanding their grocery ecommerce partnership to cover over half of the retailer’s stores by the end of the year.

Source: IGD Research

Adding 100 new clubs and 90 markets

Instacart is the leading on-demand grocery delivery company in the US. It is currently working with most of the major retailers in the country including Kroger, Albertsons and Publix. By the end of the year, it will offer grocery delivery from over 350 clubs, adding 100 new clubs and 90 new markets. The service enables Sam’s Club shoppers to have their grocery items delivered in as little as one hour.

Leaving delivery service in wholesale club channel

The service enables customers to order from Sam’s Club without being a member, however, members receive lower, member-only pricing. This could help the retailer to grow its membership base over time through converting non-member shoppers. Instacart is also working with the retailer’s key competitors in the channel, including Costco and BJ’s Wholesale.

Instacart part of the fulfilment mix

For most companies, partnering with Instacart enables them to scale up same-day delivery at pace. Through using existing stores, there is limited infrastructure investment or recruitment to be undertaken. Last year, Target’s acquisition of Shipt, a similar membership-based service, enabled it to significantly accelerate its progress with same-day delivery. Over time, we expect to see retailers adopt a range of fulfilment models for grocery ecommerce, flexing their models by location and shopper needs.

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As part of its annual update for investors, Walmart shared its growth forecasts and capital expenditure plans for next year, and how these align with its plans to develop a global ecosystem.

Anticipating sales growth of 3.0% in 2019/20

Building on the strong performance the business is currently delivering, Walmart is planning for 3% sales growth in constant currency next year. In the US, it anticipates delivering comp sales growth of 2.5-3.0% within its core store stores and around 1.0% at Sam’s Club. Reflecting the ongoing investments and testing of new programmes, it expects ecommerce sales to grow 35%. International sales are forecast to increase 5% in constant currency. This reflects the acquisition of Flipkart and the deconsolidation of Walmart Brazil. Commenting on the business, president and CEO, Doug McMillon, stated,

”We’re adapting and transforming with speed to better serve our existing customers and reach new ones. We’re operating with discipline, balancing our short and long-term opportunities. While we’re excited about what we’ve done so far, we aren’t satisfied. As we execute today and build for tomorrow, our associates and unique omni-channel assets position us for success.”

Source: Walmart

Technology investments impacting profitability

Walmart expects operating income to decline by a low-single digit percentage range, reflecting the acquisition of Flipkart. The retailer’s profits continue to be impacted by investments related to its digital transformation. These mainly relate to its efforts to grow its ecommerce operations, in the US and internationally and optimising new technlogies to drive operational efficiencies. Walmart views these as fundamental to the long-term success of the business.

Less than ten new stores in to open in the US 

Next year’s capital expenditure will be around $11bn. This will be focused on store remodels, ecommerce, technology and the supply chain, reflecting its plans to strengthen key businesses and develop the most productive growth opportunities. While Walmart plans to open just over 300 new stores internationally, mainly in Mexico, Central America and China, it will open fewer than ten in the US. This reflects the downward trend on new space in recent years. However, the retailer will expand grocery pickup to around 3,100 US stores by the end of next year. It recently passed the 2,000-store milestone.

Pushing on with business transformation

There were no significant surprises in this update for investors. The retailer remains focused on business transformation and its strategic goals of making every day easier for busy families, sharpening its culture and becoming more digital, operating with discipline and making trust a competitive advantage. These have enabled it to deliver an improving performance, including four years of positive comp sales growth in the US.

Acquisitions, partnerships and divestments

The business is now starting to look radially different. Key initiatives taken include acquisitions, such as Jet.com and Flipkart, new partnerships, such as those with JD.com and Microsoft and the divestment of non-core activities. The retailer has also built a culture of innovation which enables it to run multiple tests throughout the business, especially those driven by new technologies. Currently Walmart is testing robotics and driver-less deliveries while embedding machine learning across many areas of the business.

Source: Walmart (* partnership or joint venture)

Global ecosystem capability

These have enabled it to start developing a global ecosystem. In addition to its core stores business, the retailer has developed capabilities across ecommerce, supply chain, advertising, digital entertainment and financial services. The ability to combine and optimise these, along with its global scale and reach, will help to position Walmart as a leader in the new era of retail.

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As Albertsons reported its second quarter performance, it lowered its guidance for full year identical stores sales.

Expecting full year identical store sales of 1.0-1.3%

Albertsons’ second quarter sales increased by 1.4% to $14.0bn, with identical store sales up 1.0%. While this was an improvement on the first quarter’s 0.2% growth, the retailer has lowered its guidance for full year. It expects identical store sales to be in the range of 1.0-1.3%, compared to its earlier forecast of 1.5-2.0%.

Ecommerce sales up 113%

Ecommerce sales were up 113% in the quarter, reflecting the acquisition of meal kit company, Plated. The business has also been expanding its core grocery ecommerce operation. This includes its store pickup operation, Drive Up & Go and home delivery in partnership with Instacart. Recently, Albertsons also recently launched a new online organics marketplace in partnership with Instacart.

Source: IGD Research

Private label hits 25% of sales

The retailer continued to make progress with developing its private label offer. Penetration increased 44 basis points to represent 25.0% of sales. This is the highest level achieved within the business, reflecting Albertsons’ optimisation of Safeway’s expertise in this area since the business was acquired. In addition to expanding the range across the entire network, the retailer recently introduced a new, super premium range, Signature Reserve. While the brand was initially launched within the ice cream category, the retailer plans to introduce additional products in other categories including pasta, pasta sauces, coffee and tea.

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Presentations

18/10/2018
We present six case studies from around the world of retailers that are driving forward with unattended in-home delivery, and look at some of the key considerations for this new service.
09/10/2018
Wegmans Food Markets is the first Aira-enabled supermarket chain in the US. Aira, powered by AT&T, is a San Diego-based startup that makes use of wearable technology, artificial intelligence, and live, human assistance to deliver real-time visual description for people who are blind or have low vision.
01/10/2018
We dive into stores around the world to see how retailers are adapting to the growing demand for organic products. Our research focuses on markets where the organic sector is already well established, including North America and Europe.
26/09/2018
Imagine lifting a bag of flour or a watermelon over your head up to 4,600 times a day as part of your job – that is similar to what some Ford employees do every day as they work to build vehicles around the world.
View all presentations

Key Presentations

This in-depth guide to USA explores the key trends in grocery retail and the growth strategies of the leading retailers in the country.

We visited San Francisco to see the trends shaping food-to-go development in the US market. Read our report to learn more about 10 innovative operators and the lessons which can be applied to your businesses.

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We've developed a single, universal methodology for calculating food and consumer goods retail data, supported by our programme of primary and secondary research. This makes Retail Analysis the most reliable and robust source available for data of this type.