Walmart Leverages Its Stores as Part of Its Last-Mile Strategy

With pickup and delivery on the rise at its stores, Walmart is furthering leveraging its brick-and-mortar footprint with market fulfillment centers on the horizon as part of its last-mile strategy.

“With stores playing so many special roles, from pickup and delivery hubs to testing grounds for the latest technology, our stores couldn’t keep operating like they always had,” TJ Stallbaumer, senior manager, digital strategy and brand engagement for Walmart, said in a blog post on the Bentoville, Ark.-based retailer’s website.

Stallbaumer said Walmart increased pickup and delivery capacity by 20% last year, with plans to expand by an additional 35% this year. In the past year, Walmart saw the number of online orders fulfilled by stores increase by 170%—an evolution that Stallbaumer said is driving the growth of Walmart's market fulfillment centers (MFCs).

The market/micro fulfillment centers, which Walmart previously referred to as local fulfillment centers, are located within Walmart stores, but inventory for online orders is kept separate. This structure, according to the company, lets Walmart enhance its services for both online and in-store customers. Walmart opened its first local fulfillment center in Salem, N.H., in late 2019, and said early last year that it planned to expand the store-based fulfillment model to "dozens of locations."

With 90% of the U.S. population living within 10 miles of a Walmart—and some 4,700 stores across the country in all—"We’re in the unique position to make these brick-and-mortar locations invaluable parts of our supply chain," Stallbaumer said. He added: "As we continue to enhance store operations, it’s clearer than ever why our massive store footprint is the quiet, even unexpected, advantage to driving change." 

Using stores for online order fulfillment has been a primary model for Target, which doubled down on store-based fulfillment in 2020, with 95% of orders being fulfilled by stores. CFO Michael Fiddelke said at the time that if a given store nears its fulfillment capacity, Target would prefer to seize on nearby real-estate opportunities and open an additional store rather than turn to an alternative fulfillment option.

Walmart, in addition to using its stores as fulfillment centers, plans to leverage other technology and services—such as Walmart InHome, Walmart GoLocal and drones—to make its supply chain network more efficient, reduce emissions and ultimately serve its customers in new ways.

Stallbaumer said Walmart plans to scale its InHome delivery service, which launched in fall 2019 and delivers groceries direct to customer’s refrigerators and countertops, to 30 million U.S. homes and hire 3,000 additional associates to captain an entirely electric fleet of delivery vehicles.

The retailer’s Spark Driver network, a proprietary delivery platform that connects drivers to opportunities, is also powering Walmart GoLocal, which allows businesses to use Walmart’s high-capacity coverage to deliver its products with speed and efficiency. Recently Walmart and Cognetry Labs, a startup founded in 2019 that provides e-commerce technology for independent and midsize retailers, announced Walmart GoLocal support smaller and regional grocery players who want to expand their delivery coverage and capacity.

“Each of these innovations by themselves is great for customers. But when you view them all together, you realize how impressive the bigger picture really is here. Why? Because we’re set up for a cycle of success, underpinned by the nationwide store distribution no one else has,” Stallbaumer said.

Tom Ward, chief e-commerce officer for Walmart U.S., added, “As we continue to create new delivery options for customers and members, and new capabilities for Walmart GoLocal clients, we add density to the last mile. With more density comes more opportunities for drivers, and more opportunities result in increased speed. This means we can get customers and clients their items even faster, all while helping lower costs. It’s a happy cycle.”