BENTONVILLE, ARK. — Walmart’s newest tactic in its fight against online giant Amazon: enlisting its employees to deliver online orders on their way home from work.
The idea, Walmart executives said Thursday, is to cut costs on the so-called last-mile of deliveries, when packages are driven to customers’ homes, often the most expensive part of the fulfillment process.
“It just makes sense: We already have trucks moving orders from fulfillment centers to stores for pickup,” Marc Lore, chief executive of Walmart’s e-commerce business and the founder of Jet.com, said in a blog post Thursday afternoon. “Those same trucks could be used to bring ship-to-home orders to a store close to their final destination, where a participating associate can sign up to deliver them to the customer’s house.”
The company began testing the package-delivery program a month ago in three stores — two in New Jersey, one in northwest Arkansas — but did not offer details on when, or where, it would expand across the United States.
Employees will be paid extra for the voluntary program, and offered overtime pay as necessary to make the deliveries, Walmart spokesman Ravi Jariwala said Thursday.
“Walmart is uniquely qualified, uniquely positioned, to be able to offer this,” he said, adding that 90 percent of Americans live within 10 miles of a Walmart store. “There is really strong overlap between where our associates are already heading after work and where those packages need to go.”
The company is billing the program as a way for employees to earn extra money, although there were few details on how they would be paid. Jariwala declined to clarify whether employees would be paid based on distance, time, number of deliveries or a combination of those things.
[Walmart is preparing to take on Amazon. But first, parachuting M&M’s.]
Labor experts say the arrangement, a mash-up of sorts between an Uber-style gig economy and traditional employment arrangements, raises a number of questions related to employees having to shoulder much of the risk, cost and liability associated with deliveries.
“The practice seems ripe for abuse if the company does not compensate workers for the full cost of their journey, the expenses related to gas, car depreciation, and potential problems like accidents, tickets or parking expenses,” said Stephanie Luce, a labor professor at the City University of New York. “Like other ‘gig economy’ type jobs, there is a potential to benefit workers — but in reality, most of the benefits accrue to the employer, not the employee.”
Earlier this year, Walmart — which last year reported $485.9 billion in revenue — said it would raise its hourly minimum wage to $10 for most workers, but activist groups say many employees are still struggling to make ends meet.
“Instead of Walmart paying its workers what they deserve for their work, Walmart is merely offering to pay more — for more work,” said Randy Parraz, director of Making Change at Walmart, a campaign run by the United Food and Commercial Workers International Union.
“To say this is a voluntary program is like throwing a life preserver to someone drowning in a lake,” he added. “When so many workers are paid so little that they need government assistance to make ends meet, it becomes a necessity, not a choice, to do what they can to earn more.”
Some Walmart employees were also skeptical of the arrangement, particularly given the lack of specifics.
“Without understanding if associates are going to be compensated for gas, additional insurance costs, wear and tear on our cars and the potential risks of delivering packages, this program could be creating problems for associates,” said Cynthia Murray, a Walmart employee in Laurel, Md., who leads the Organization United for Respect Walmart, a workers’ activist group. “While Walmart continues to point to its 1.5 million associates as its advantage over companies like Amazon, we also know that they are not doing enough to support us and our families.”
This isn’t the first time Walmart has enlisted others to deliver its goods. Four years ago, executives told Reuters they were toying with the idea of having customers deliver packages to online shoppers in exchange for a discount. The company also partners with ride-sharing services like Uber, Lyft and Deliv to deliver groceries in Phoenix, Denver and Miami.
“We think crowdsourcing is a mechanism of the future, and frankly, as you think about the move to driverless [vehicles], that could also make the cost of delivery lower,” Scott Price, chief administrative officer of Walmart International, said Thursday. “The inefficiency of delivery can destroy profitability.”
Thursday’s announcement comes as Walmart doubles down on its online business, where sales grew 63 percent in the first quarter of this year. The company — long the country’s largest retailer — has taken aggressive steps in the past year, beginning with its $3.3 billion purchase of Jet.com to compete with Amazon.com, which accounts for about 33 percent of the country’s online sales. (Jeffrey P. Bezos, the founder of Amazon, owns The Washington Post.)
Walmart has also been rapidly expanding its grocery pickup program, in which shoppers retrieve online orders in the parking lots of a nearby store. More recently, the company has begun offering discounts on certain digital purchases if customers opt to pick them up in-store. In that model, Walmart uses its own trucking fleet to deliver packages to stores, tapping into an existing transportation network.
Amazon.com is also making similar efforts to speed up delivery. The Seattle-based company in recent months has leased a fleet of 40 cargo jets, and has developed an Amazon-branded trucking fleet. It also created Amazon Flex, an on-demand network of drivers, similar to Uber or Lyft.
Walmart employees, Jariwala said, have delivered hundreds of packages during the past month, fulfilling orders placed on Jet.com, which Walmart acquired last year, as well as Walmart’s own website.
Walmart employees can sign up for up to 10 deliveries per day using a company app, Jariwala said. They can also set size and weight limits on packages. If there are not enough employees to deliver packages, carriers like UPS and FedEx would fill in.
“This is completely an opt-in program,” he said. “This is not something associates are required to do. They are, first and foremost, always going to finish their shift.”
Sarah Halzack contributed to this report.