The retail war is intensifying with the focus gradually shifting toward minimum delivery time of your groceries. In February, Amazon.com, Inc. (AMZN - Free Report) started offering two-hour Whole Foods delivery to its Prime members. And now Walmart Inc. (WMT - Free Report) , Target Corporation (TGT - Free Report) and The Kroger Co. (KR - Free Report) are following suit with same-day delivery services.
Almost all retail giants are pumping in more money and either acquiring or partnering with delivery service companies for same-day delivery to stay ahead in the race. With changing shopping habits, retailers are bent on minimizing the time between the actual placement of an order and its delivery. Needless to say, the gap between online and offline retail is fast disappearing and it’s only a matter of time when others jump the bandwagon.
Amazon Shows the Way for Same-Day Delivery
Amazon set the ball rolling by playing to its strength — a strong delivery wing — when it started offering free-two-hour delivery service from Whole Food stores to its Prime members in February. The move came within a year of the e-commerce giant’s $13.7-billion acquisition of supermarket chain Whole Foods that stocks a wide range of fresh produce, meat, seafood, flowers and other items (read: Will Amazon's 2-Hour Whole Foods Delivery Skew Retail Pitch?).
It goes without saying that Amazon has been a pioneer in minimizing the gap between online and offline retail space. The company is pulling items from Whole Foods stores, packing them and getting the goods delivered by its own drivers. Moreover, it is all free and within two hours. This move is in a bid to explore and add novelty to the untapped online groceries market, and the Whole Foods acquisition was a giant leap toward this direction.
Naturally, the idea is to lure more customers on the convenience quotient and the two-hour delivery service has certainly given Amazon enough power to compete with brick-and-mortar giants like Walmart, Target, Kroger, Dollar General (DG - Free Report) and Dollar Tree (DLTR - Free Report) . Understandably, same-day delivery is the need of the hour and Amazon’s recent initiative has not only made its rivals sit up and think, but also gear up for an ensuing battle.
Walmart Fights Back
Brick-and-mortar giants like Walmart, Kroger and Target, which so long, in order to compete with Amazon, were stressing on increased investments in e-commerce, have perhaps realized that bridging the online and offline gap is the ideal way to compete. So, most of these companies are busy reallocating their investments to add muscle to their delivery service wing.
Walmart recently announced that it will be expanding its delivery service to 100 metropolitan areas by the end of 2018, with orders fulfilled at more than 800 stores across the country and delivered to shoppers contracted through Deliv, Uber and other delivery contractors. Moreover, customers who order a minimum of $30 and pay a delivery fee of $9.95 will get their purchases delivered in four hours provided they order by 1 p.m. This definitely is a challenge to Amazon.
Interestingly, Walmart’s e-commerce sales growth in the United States slowed to 23% in the fourth quarter, marking a sharp decline from 50% in the prior quarter. This is being viewed as a setback for investors. However, Walmart is hopeful of registering 40% growth in online sales this year, as it has plans of investing extensively in e-commerce, which is expected to drive organic sales by 40% in fiscal 2019. Walmart has a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Kroger, Target Expand Same-Day Delivery
Target too isn’t lagging. In December 2017, the company announced plans of acquiring grocery delivery service Shipt for $550 billion and using its technology platform to expand same-day delivery at Target Stores. And come Mar 29, Target and Shipt will start same-day delivery of more than 55,000 groceries and home goods, toys, electronics and other products in Baltimore and Washington. The company also expects to make same-day delivery available from most Target stores before 2018 end and for products in all of its major categories by the end of 2019.
Much like Walmart and Target, Kroger too will be expanding its partnership with same-day grocery delivery service Instacart to offer home delivery from 55 central Ohio Kroger locations. The company currently offers home delivery in 45 markets, with Instacart partnering in 27 of those markets. Also, Kroger has plans of offering delivery in 100 markets by the end of 2018.
No doubt, Amazon has taken the retail landscape to a different level altogether with minimum delivery time and others following suit. According to NPD Group, about 7% of U.S. households bought groceries online last year. Among them, most prefer their orders delivered to their doors, while the rest pick up from the store. This certainly emerged as an area of prime importance for most retailers and major players are going all out to tap this same-day delivery service space.
Moreover, according to Nielsen and the Food Marketing Institute, although only 23% of consumers in the United States buy groceries online, the next five-seven years is expected to see a whopping 70% preferring the same. So it may well be assumed that the same-day delivery space will heat up pretty soon.
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