The deal with Walmart is part of Home Depot's goal to offer same-day or next-day delivery to 90% of the U.S population. For Walmart, it gives credibility to its new delivery service.

When Home Depot Inc. became the first merchant to hire Walmart Inc.’s GoLocal delivery service to offer same-day and next-day delivery, it was a step toward important goals for each giant retailer.

For the home-improvement retailer, the deal is another step toward reaching its fast delivery goals. For Walmart, the agreement represents the creation of a non-retail line of business that leverages its existing, vast logistics network.

John Drake, vice president of delivery at Home Depot, says the arrangement makes sense, in part, because Walmart’s geographic footprint broadly matches its own and operates in places where other delivery providers don’t offer good coverage, such as rural areas.

“Walmart has an established last-mile delivery program in the communities it serves—and in many cases, we share the same communities,” Drake says. “With Walmart GoLocal, we can help expand our common goal of making fast and reliable local delivery available to customers in the communities we serve, especially in rural and suburban communities where delivery service providers aren’t as dense.”

The two companies did not disclose the financial terms of the deal. Home Depot is No.4 in the 2021 Digital Commerce 360 Top 1000 and Walmart is No. 2.

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What Home Depot gets from the Walmart deal

Drake says the deal with Walmart is part of Home Depot’s goal to offer same-day or next-day delivery to 90% of the U.S population. Toward that end, he added, Home Depot already works with several shipping vendors. For example, Home Depot started working with delivery provider Roadie in 2018.

The GoLocal service will begin in select stores in Texas, New Mexico and Northwest Arkansas, with plans to expand to multiple markets across the country as the year progresses, Drake says.

A Walmart spokesman says GoLocal Drivers will be part of its existing network and deliver items that easily fit in a car, such as nails, hardware, paint and supplies. They will not deliver bulk and oversized items such as lumber, large household appliances and drywall.

At checkout, Home Depot.com shows which products qualify for fast, car-based delivery from delivery providers.

Home Depot currently charges an $8.99 delivery fee for same-day or scheduled car-based delivery from services like Roadie and the same will apply to GoLocal. But delivery by car is not available on all items. For example, delivery is free for many major appliance purchases. For appliance major delivery, and Home Depot provides a four-hour delivery window one business day before the delivery date, according to the retailer’s website.

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Sylvain Perrier, president and CEO of grocery ecommerce platform Mercatus USA Inc., says hiring Walmart gives Home Depot a service it sorely needs.

“Home Depot’s ecommerce local delivery has historically been a significant gap for them,” Perrier says, so he thinks working with GoLocal is an astute move for the retailer. That’s because the GoLocal service most likely offers Home Depot the quickest way to add delivery-area coverage without having to rely on a vendor who would take the lion’s share of the margin with high delivery fees, he says.

In fiscal 2020, which ended Jan. 31, 2021, Home Depot’s online sales increased 86% year over year, with more than half of online orders fulfilled through stores. The retailer also reported record sales of $132.11 billion in fiscal 2020, up 19.9% compared with $110.22 billion in 2019.

Home Depot’s emphasis on fast delivery matches the desires of a growing segment of consumers. According to a September survey of 1,000 online shoppers from Digital Commerce 360 and Bizrate Insights, 46% of shoppers cited speed of delivery as one of the key factors they will consider when picking online retailers this holiday season. And 53% cited having products “in stock and ready to ship” as a crucial factor. 

What Walmart gets from the Home Depot deal

Perrier says the delivery deal announcement helps Walmart more than Home Depot.

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“It’s a bigger win for Walmart as it lends credibility to their market strategy. Home Depot would have had the same splash if they would have partnered with Instacart and DoorDash,” he says.

A Walmart spokesman says GoLocal has already had signed contracts “with national and enterprise retail clients, but declined to name the retailers or which product categories they represent.

He added that Walmart has quickly scaled its delivery market reach over the last three years, reaching nearly 70% of the U.S. population through more than 3,000 of its 4,743 U.S. stores.

“With GoLocal, we can enable other business to take advantage of our economies of scale to offer quick, white-labeled delivery services to its customers,” the spokesman says.

Walmart’s GoLocal service, launched in August, is aimed at providing merchants delivery services at what Walmart calls “competitive pricing.” According to company statements, Walmart created GoLocal to leverage its massive logistics operation to create a new line of business. The goal is to sign up retailers of all sizes, including local stores and national chains.

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The delivery service is one of the latest moves by Walmart CEO Doug McMillon to diversify Walmart’s revenue away from its core operations. In January, Walmart created a financial technology startup in partnership with Ribbit Capital. That partnership plans to offer “next-generation digital financial products.” So far, Walmart has not announced the nature of those products.

Walmart also has bulked up its digital advertising business, which it now calls Walmart Connect, along with unveiling a fulfillment service for merchants who sell goods on its third-party marketplace site. And in July, Walmart said it would start selling technology to help merchants offer in-store pickup.

Walmart also said that merchants using Adobe’s Commerce Platform would be able to syndicate their product catalogs and list items for sale on Walmart Marketplace by early next year. Adobe merchants will also have access to online and in-store fulfillment and pickup technologies from Walmart.

Bloomberg News contributed to this report.

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