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OM in the News: Wal-Mart Cracks the Code for Online Groceries in China

December 10, 2017

An employee fills electronic orders for the 1-hour delivery platform at a Wal-Mart store in Shanghai

Amazon may have sent a chill through the U.S. supermarket business with its purchase of Whole Foods. But grocers also had better keep an eye on the world’s largest brick-and-mortar retailer—Wal-Mart Stores—for some lessons on the future of online grocery shopping. Wal-Mart has already developed a big online grocery delivery business in China, capable of transporting fresh produce from its shelves to homes within an hour.

To accomplish that feat, it’s created a network of chilled mini-warehouses, used A.I. to tailor inventories, and employed an army of crowdsourced deliverymen to rush meat, fruits, and vegetables to customers’ doorsteps. That could provide it with insight and experience to keep tech upstarts from disrupting it out of one of its core U.S. businesses.

Fresh food is considered the last frontier of Chinese e-commerce. “Wal-Mart’s efforts in China revolve around trying to tap into a smartphone, convenience-craving, population,” writes Businessweek (Dec. 4, 2017). 

At the heart of its operation are what it calls “dark stores” that stock 1,500 different products such as bananas, pork ribs, dumplings, and chicken feet. Workers grab printouts of the online orders, zip through the aisles placing items in a bag, and exit the other side, where they hit a button summoning a delivery driver. The drivers are independent contractors with cellphones and scooters. The time from picking up the order printout to hitting that button can’t exceed 10 minutes, or else the 1-hour delivery is in peril.

Shelves are stocked with products based on order patterns for the surrounding area—meaning a store in northern China may have more soup ingredients as winter comes. The company adjusts each store’s online inventory every 4 weeks, and the added information about fresh grocery demand from web orders helps boost the accuracy of Wal-Mart’s product forecasting for offline stores.

Classroom discussion questions:

  1. Is this online operation transferable to the U.S.?
  2. How does this approach differ from typical supermarket shopping?
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