Walmart and Target are in a tit-for-tat battle to find new ways to expand their same-day delivery capabilities.
On Tuesday, Target unveiled during its earnings call that it is incorporating same-day delivery into its newly introduced paid membership program.
Two days later, Walmart came in with delivery news of its own, debuting the option to order products online as early as 6 a.m. for morning deliveries.
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According to Axios, which first reported the Walmart news before the company officially unveiled the on-demand service, shoppers have two different morning express options. The first delivery option is priced at $10 per trip and applies to customers that want items delivered in about an hour or less. The second option will cost $5 and promises to deliver items in about three hours. There will also be a base delivery fee for customers that are not members of the $98 per year Walmart+ loyalty program.
Walmart says “hundreds of thousands” of items in-store and “hundreds of millions more” online are available dacross products like baby essentials, work attire, home appliances and outdoor supplies.
Target’s same-day delivery news was part of the wider upcoming launch of Target Circle 360, a new membership tier of the Target Circle loyalty program that first debuted in 2019. Target Circle 360, set to launch April 7, costs $49 for the first year of membership for new members that sign up through May 18.
Paid members are eligible for same-day delivery on all orders over $35, without any fees. Since the service is powered by Shipt, members are also eligible for same-day delivery from the company’s more than 100 retail partners.
The timeliness of the announcements inevitably underscored the ongoing competition between the two retail giants. But both same-day programs appear to be just as much about insulating against another top competitor that has dominated the e-commerce and delivery space.
“The moves are, in large part, designed to compete more effectively with Amazon which remains the king of fast delivery,” said Neil Saunders, managing director of research consultancy GlobalData Retail.
Amazon offers free same-day delivery to its Prime members, who pay $139 per year to join the program, which also includes content streaming and discounts on purchases at Whole Foods, among other perks.
But beyond Prime itself, the e-commerce giant illustrated earlier this year that it is continually optimizing the cost of its delivery capabilities, further adding to Amazon’s already substantial advantage.
Compared to a year prior, Amazon has cut the average cost to get a product to a customer by 45 cents per unit in the U.S. Helping slash the costs is the tech titan’s expanding fleet of more than 55 dedicated same-day delivery sites across the country.
These hybrid sites are part fulfillment center, part delivery station, often covering 100,000 to 330,000 square feet. The smaller sites are positioned to allow Amazon to fulfill, sort and deliver products all from one site to get products out to customers quicker. This runs counter to many retail distribution networks, in which the package goes from a fulfillment center to a sortation center and then to a delivery station. Amazon says it can fulfill orders in less than five hours after customers hit the buy button.
In the fourth quarter of 2023, Amazon increased the number of items delivered the same day or overnight in the U.S. by more than 65 percent year over year.
Even if the competitive investments by Walmart and Target are successful, that’s not to say they are not without risk, according to Saunders.
“Speedy delivery is expensive and chasing Amazon is not always a sustainable way to try and capture market share,” Saunders told Sourcing Journal. “Target will, at least, try to recoup some of the cost via its paid for membership program, but this will also limit the service to customers who are willing to pay up.”
Same-day services, despite the costs involved, have been a revenue driver for Target in particular. Same-day services have accounted for $12.5 billion, or 70 percent of Target’s e-commerce growth between 2013 and 2023, said Michael Fiddelke, Target’s chief operating officer and chief financial officer.
And given Walmart’s breadth of more than 4,600 total stores in the U.S., the retailer has been figuring out how to cut the costs of its delivery operations. In just one year, Walmart lowered e-commerce losses by 40 percent, with the company slashing last-mile store-to-home delivery costs by about 20 percent.
The efficiency has been notable for Walmart, which now enables same-day delivery from roughly 90 percent of U.S. stores. In line with that total, store-fulfilled delivery sales were up nearly 50 percent from the year prior.
