As a leading global retailer, it is not surprising that Walmart is as active on the last mile front as anybody. Logistics Management’s Jeff Berman recently had a chance to talk to JP Suarez, Chief Administration Officer for Walmart International, to learn about Walmart’s global last mile initiatives. A transcript of their conversation follows below.
Logistics Management (LM): What are the main objectives of the Walmart last mile delivery program, in terms of how it sets up operations in new global markets?
JP Suarez: The first thing is trying to understand the customer demand and what the customer is wanting in terms of a last mile solution, or capabilities, in a particular location. We want to be sure we are able to meet customer needs and not make a promise that we cannot deliver on. We are looking at the market and our customers and where we think and understand the demand will be and try to get going by leveraging the technology we have within our company or we try to find partners. One thing we have shown in whatever market we operate in is that customers want convenience when they shop.
LM: In what ways?
Suarez: It does not necessarily mean that they need a store. They just want it to be frictionless and easy to interact with us, whether it is online or in a store, or, in this [last mile] case, on demand. What we want to do is to be able to provide that in a Walmart way with great price and great value of our product, and in a way that the customer can trust us.
LM: What are the biggest challenges in setting up operations in new and different regions, given the emerging nature of last-mile delivery?
Suarez: It is all the operational challenges that we have. The first thing is we always start with the customer in making sure that we are going to meet customer expectations and not upset the customer with a bad experience or bad product, or a bad service level. Some of the challenges are making sure we have the right number of drivers to meet demand or the last mile solutions to meet the demand that we have. And if we are using a partner, we need to make sure it reflects the Walmart values that we have, as partners are an extension of us and our brand. We are very protective of our brand, as that is our promise to our customers in every single market. Some challenges are real practical like basket size. In our delivery model in China, we use two-wheelers, so the size of the order is different than what we can do, in, say, the UK, where we use delivery vehicles that actually have some pretty big order sizes. We need to understand how we meet customer demand, depending on how big the orders are going to be. We figure out all of those things the market needs, as they think about taking care of their customers with an on demand solution.
LM: Are you finding, or seeing, more traction for certain types of last mile services than others, among your customer base?
Suarez: It is different in every market. Online grocery, as the name reflects, is available for on demand or for delivery, but online grocery…is commonly food but not exclusively food. What we also need to keep in mind is when we talk about “omni,” it is not just on demand. Our capabilities include pick up in our stores or pick up in remote locations or last mile delivery on demand to your home. We have any number of ways to connect the customer to our products and into our stores. For example, in Canada, we have these locations called Penguin Pickup, where customers can order full baskets and we deliver them to a remote pickup point–for a refrigerated, frozen, or ambient product-and the customer goes into the remote pickup point in an urban location and grabs the basket, or bags, and takes it [home]. That works great, too. The customer has a lot of choice and a lot of options.
LM: What are the biggest benefits and advantages of last-mile partnerships like the ones Walmart has with Instacart in Canada and ASDA in the U.K.?
Suarez: We are very open to partnering with the right companies that can delivery a service or capability with speed that our customers want. If we partner with a company like an Instacart or someone else that makes sense and is in line with our company and reflects our brand through to the customer, we are happy to partner with them. But we also do it on our own when it makes sense. In the U.K., we do last mile deliveries through Walmart or ASDA’s associates. Whether we partner or do it on our own, it is about speed, delivering the right experience for our customers, and about making sure that we reflect Walmart when we deliver, because we never want to dilute the Walmart brand.
LM: In your last mile partnership with Instacart, for example, what do you see as some of the synergies when collaborating, in terms of how you work together and help each other out?
Suarez: It is always a good partnership, when both sides get benefits out of the relationship. With Instacart, we get to scale and coverage in a lot of locations very quickly, because they already have an installed base of shoppers and the technology developed to be able to allow customers to shop online. There is also speed to market and a capability that works. This is a good partnership for us. In Chile, we have a great partnership with Cornershop, and it is now growing in Mexico. And they are able to bring a lot of shoppers online very quickly and deliver what our customers want very quickly. If a customer wants to pick up an order in our store, we can do that, too. It is really about speed, capability, and being able to partner well together.
LM: Looking at the last mile market, what has changed most over the last three-to-five years and where do you see things going in the future?
Suarez: We think that where this whole thing is going is going to be an omni-enabled store. Whether it is going into the store for shopping or doing pickup, delivery or on demand delivery, or some combination of those, that is where this thing is evolving. The way we serve our customers, to give them the choice of how they want to shop with us and where they want to shop with us, and make it as frictionless as possible. So whether customers are searching online for products they want to pick up in store, or they want to go get in a store, the more friction taken out of that to engage with us, the more the customer will reward us with their shopping and their business. I think omni is where this is going; it is going to give the customer many different ways to choose how they want to shop with us.
LM: From a competitive perspective, given all the retailers and players in this space, what are some things Walmart is doing on the last mile front that are providing a competitive benefit or advantage, as it relates to staying a step ahead of the competition?
Suarez: One of the best things that we have which is a competitive advantage for us, are stores, and we are close to a lot of our customers. In Mexico, we are within 10 kilometers of around 80% of all of the population there. We have a tremendous amount of coverage already, and we have product near where the customers are. We make it easy for those customers to shop with us, and we will have a great opportunity to win their business. It is something we have that very few competitors have, and we view that as one of the ways we are going to compete in this space. And we are going to do what we do well, which is offer a great product, great prices, empower strong local businesses that we already have, because we are already a good retailer in all of these markets. We are going to offer delivery or on demand or omni capabilities within what we do well, which is be a really good retailer in a local market, and I think that is a pretty good competitive position for us to be in. Now we have to go deliver on it.
LM: In terms of your last mile infrastructure, how do you go about assessing and planning things?
Suarez: We will build, buy, or partner, and it all depends on what problem we are trying to solve and what makes the most sense for us. Speed is incredibly important in a retail environment, and anything that is able to go fast, we will consider as a solution.
LM: Is there any correlation or connection between last mile and BOPIS (buy online pick up in store)?
Suarez: When we talk about omni-channel, that is what we are talking about. What we are discovering is that when we offer multiple ways to shop with us, customers choose multiple channels. Sometimes they come into a store, because they want to touch and feel…and take their time in making the right decisions, and sometimes they need the convenience of it being delivered to their house, and other times they want to know the product is there so they can stop by at the end of the day to pick it up. That is the omni capability with a store that puts the customer in control and lets the customer decide how and when they want to shop with us and give them that freedom and flexibility.
LM: What are some of the main concerns you see that have the potential to impede last mile goals and objectives?
Suarez: Attention needs to be paid to the local government regulations where we are. And we want to make sure we comply with whatever the government regulations are…and we have to operate within whatever the regulations are. There is a lot of disruption going on in retail right now, but I firmly believe if you get the core fundamentals right, as you offer the omni shopping experience, customers are going to stick around for a while. Stores are going to matter for a long time if they are done well and are omni-enabled. What we really have to do is focus on what we do well, which gives us a pretty good shot.
LM: How do you view the ongoing trade tension, as it relates to last mile operations and planning?
Suarez: The only thing I would say there is that our customers care more about price and value and experience and convenience more than trade or tariffs.
LM: If you were to provide a last mile playbook, of sorts, what would some of the key elements be that you would highlight to your staff to be delivering on your service promise?
Suarez: There are two big ones that are both about retail. The first one is being on time. If you say you are going to be somewhere at a certain time, you have to be within that window, and you have to try to avoid substitutions. There is nothing more disappointing to customers when they walk into a store and cannot find things they came there for. It is the same for ordering online. If we have to substitute, that can sometimes lead to a bad experience, so we have to continue to be able to improve on our ability to meet the customers’ shopping list every single time.
LM: What is your take on the connection between last mile logistics and inventory management?
Suarez: It is an important piece, because we want to make sure as a customer is ordering online, what we are saying is available on a shelf is actually going to be available at the time the order is picked and then delivered to the customer. We have to make sure that in that entire transaction we don’t disappoint the customer by not having what we said we were going to fulfill. There are a lot of inventory management-related components that we have to reflect in our processes in order to make sure we have what the customer asked for.