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Walmart has acquired New York City-based logistics startup Parcel for less than $10 million, a source told Recode. Parcel was founded in 2013, and previously raised $2 million from investors.
It has handled both scheduled and same-day deliveries for meal-kit providers and e-commerce companies like fellow Walmart acquisition Bonobos. Parcel will be able to continue those partnerships, but Walmart will now have access to its technology and network.
Acquiring Parcel will help Walmart and Jet.com offer same-day delivery in New York City. Walmart’s e-commerce chief, Marc Lore, said last week that the retailer will soon provide same-day delivery in New York City, with Jet.com already testing the service, and Parcel should help make that a reality. The startup has built a database of every New York City building it has delivered to, featuring information and photos for each building’s service entrance to maximize efficiency in an environment that can be hard to navigate quickly. This database should help Walmart and Jet.com hone their delivery in New York City. Moreover, the technology could potentially be applied to other crowded cities where delivery workers face similar difficulties.
Same-day delivery is popular with consumers, and Walmart needs it to combat Amazon. Consumers’ definition of fast shipping is shifting quickly — in 2015, three- to four-day shipping was considered fast, but now, anything over two days is seen as slow, and this window is likely to further narrow in the years ahead. Additionally, a quarter of shoppers abandon an online purchase after they learn there is no same-day delivery option, meaning retailers need to find ways to offer the often costly option now before consumers demand the service. Amazon is at the forefront of same-day delivery, and Walmart will need to build out its own offering beyond New York City if it hopes to catch the e-commerce titan.
Parcel’s speedy delivery may also give Jet.com’s new private-label a fighting chance.Jet.com recently announced the launch of its consumables-focused private-label, Uniquely J. The brand will likely be battling offerings like Target Restock, which features similar products and next-day delivery, putting it in the thick of competition from the get go. If Parcel allows Jet.com to deliver Uniquely J products on the same day as orders are placed, that adds an additional value that could win it a number of customers.
Brick-and-mortar retailers are caught on the wrong side of the digital shift in retail, with many stuck in a dangerous cycle of falling foot traffic, declining comparable-store sales, and increasing store closures. Over 8,600 retail stores could close this year in the US — more than the previous two years combined, brokerage firm Credit Suisse said in a recent report. Meanwhile, e-commerce pureplays are riding the rise of digital commerce to success — none more so than Amazon, which accounted for 53% of online sales growth in the US last year, according to Slice Intelligence.
In response, many brick-and-mortar retailers have started to use omnichannel fulfillment methods that leverage their store locations and in-store inventory in order to better compete in e-commerce. These omnichannel services, including ship-from-store and click-and-collect, can help retailers manage the transition to digital by:
- Increasing online sales by offering cheaper, more convenient delivery options for online shoppers.
- Limiting the growth of shipping costs as online sales volumes increase by leveraging store networks for delivery.
- Keeping stores relevant by turning them into fulfillment centers that pull customers in to pick up online orders.
However, few retailers have mastered these new fulfillment services. While these companies have spent years optimizing their supply chain and logistics networks for delivering goods to their stores or directly to customers’ doorsteps, most have yet to figure out how to profitably bring their store locations into the e-commerce delivery process.
Jonathan Camhi, research analyst for BI Intelligence, Business Insider's premium research service, has laid out the case for why retailers must transition to an omnichannel fulfillment model, and the challenges complicating that transition for most companies. This omnichannel fulfillment report also detail the benefits and difficulties involved with specific omnichannel fulfillment services like click-and-collect, ship-to-store, and ship-from-store, providing examples of retailers that have experienced success and struggles with these methods. Lastly, it walks through the steps retailers need to take to optimize omnichannel fulfillment for lower costs and faster delivery times.
Here are some of the key takeaways from the report:
- Brick-and-mortar retailers must cut delivery times and costs to meet online shoppers’ expectations of free and fast shipping.
- Omnichannel fulfillment services can help retailers achieve that goal while also keeping their stores relevant.
- However, few retailers have mastered these services, which has led to increasing shipping costs eating into their profit margins.
- In order to optimize costs and realize the full benefits of these omnichannel services, retailers must undertake costly and time-consuming transformations of their logistics, inventory, and store systems and operations.
In full, the report:
- Details the benefits of omnichannel services like click-and-collect and ship-from-store, including lowering delivery times and costs, and driving in-store traffic and sales.
- Provides examples of the successes and struggles various retailers have experienced with omnichannel delivery.
- Explains why retailers are having trouble managing costs with their omnichannel fulfillment efforts, which are eating into their profits.
- Lays out what steps retailers need to take to optimize costs for their omnichannel operations by placing inventory where it best meets customer demand.
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