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Walmart Is Trying New Ways to Disrupt the Grocery Business

By Daniel B. Kline - Sep 18, 2018 at 6:00AM

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The company is expanding a test of a unique idea.

Walmart ( WMT -2.48% ) has devoted significant resources to offering customers new ways to order online, then pick up in its stores. This has included offering in-store kiosks, and curbside pickup of grocery orders at some stores.

Now the company has decided to expand a plan that's sort of a combination of the two. The retail giant is launching a second automatic kiosk that works as a sort of vending machine for grocery orders placed digitally, Business Insider first reported.

It's a play at offering added convenience, in which consumers will be spared having to speak to a human being. In theory, it will also improve the speed of service compared to a human having to fetch the order.

A Walmart worker assembles a grocery order.

Walmart employees will pick and bag the orders. Image source: Walmart.

How does it work?

Customers place an order via app or website. That order is then assembled by workers in the store who place it inside the temperature-controlled vending machine. Once the consumer arrives at the store, he or she parks near the vending machine or kiosk, scans a barcode, and picks up the bagged, ready-to-go order in under a minute.

The first kiosk could serve two customers at a time. The new larger one allows five people to pick up groceries at the same time. The system is free to use, but orders must contain over $30 in groceries.

It's a system built around customer convenience. Walmart isn't making people enter the store, which takes away its opportunity to increase the size of their purchases through impulse buys.

Part of a bigger plan

Walmart wants to deliver whatever customer service experience will make people happy. That means offering a lot of different options for both groceries and regular merchandise.

"Two years ago, we had no pickup towers, and by the end of this year, we'll have more than 700," said Walmart CEO Doug McMillon during the company's second-quarter earnings call. "We're serving more grocery pickup and delivery customers, and now have more than 1,800 locations with grocery pickup. We're also making good progress on activating grocery delivery to cover 40% of the U.S. population by year-end."

McMillon also noted that the retailer has improved both its wait times for pickup and its delivery times. "We're continuing to innovate with trials of self-driving cars in Arizona for our grocery pickup customers, and automated picking capabilities for grocery pickup in our store in Salem, New Hampshire," he said.

It's silly, but a good idea

Whether consumers want to pick up groceries from a giant vending machine remains to be seen. It also still needs to be proved that a market will exist for variations on curbside pickup once delivery becomes widely available.

Whether this is needed or not, Walmart is smart to test as many concepts as it can. The company understands that people have choices about where to shop, so retailers must offer consumers exactly what they want, or risk losing them.

That probably doesn't mean giant vending machines full of grocery orders, but it could; also, some aspect of testing this may lead the company to the next big thing. This is Walmart trying to figure out how to best serve customers -- and doing that will be good for the company as well as its shoppers.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis – even one of our own – helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.

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