Walmart Closes Pickup-Only Grocery, But Others Are Just Getting Started

Walmart is closing its two pickup- and delivery-only concept stores in the Chicago suburb of Lincolnwood and in Bentonville, AR.

Walmart opened the Lincolnwood store in 2019 on the site of a former Dominick’s Finer Foods supermarket. The store at 41,700 square feet was significantly larger than other pickup and delivery locations opened in recent years by the retailer in Bentonville and Metairie, LA.

Customers at the Lincolnwood store placed grocery orders through Walmart’s website or mobile app and arrived at an assigned canopied bay in the parking lot at the specified time to pick up their purchases.

Walmart spokesperson Felicia McCranie said the decisions to close the store in Lincolnwood and two others in the Chicagoland area were made after a “thorough review process,” which found that they had not performed up to the company’s expectations.

“We are grateful to the customers who have given us the privilege of serving them at our Lincolnwood location,” Ms. McCranie said in a statement.

In an online discussion last week, some of the retailing experts on the RetailWire BrainTrust saw Walmart’s move as an indication that there is something flawed with pickup-only concepts.

“Color me skeptical that the pickup-only model is sustainable,” wrote Dave Bruno, director of retail market insights at Aptos. “While I suspect the size of Walmart’s 47,000 square-foot space in Illinois may have been part of the problem, I just don’t know that locking shoppers out of the in-store aisles is a smart move. To work, the pickup-only stores need to be located close to their target shoppers, which by definition implies higher rent spaces. So if I am paying retail rent but then shutting out retail shoppers, that puts an awful lot of pressure on the marketing of the pickup option.”

“During the pandemic, yes, this worked, but while there is a niche that doesn’t want to talk to anyone and finds some kind of value in driving to the store and waiting, most [shoppers] are not like this,” wrote Bob Phibbs, The Retail Doctor.

“I think this store format was a pandemic-era phenomenon and, ultimately, Walmart has bigger fish to fry,” wrote Paula Rosenblum, co-founder of RSR Research.

Walmart’s decision, however, is not likely to dissuade startups pursuing a similar approach.

Addie’s recently opened its first pickup-only grocery concept store in Massachusetts after receiving $10.1 million in seed funding. The 22,000-square-foot store in Norwood opened on Jan. 26.

The company points to the expected growth in online ordering, unprofitable delivery models and the inadequacies of current pickup models as playing in its favor as it enters the market.

“Just because it doesn’t work for Walmart doesn’t mean it’s a bad idea,” wrote Mark Ryski, CEO of HeadCount Corporation. “There are many reasons for why Walmart decided to discontinue this offering, but it ultimately comes down to the fact that these stores were not delivering the outcomes expected. Full stop. I believe there still is a market for pickup-only players like Addie’s, and so Walmart’s decision should have no bearing on Addie’s or others.”

Addie’s says it took a zero-based approach to reimagine grocery operations, including inventory management and store and parking lot layouts, to improve efficiency and the customer experience at the same time. The company boasts a $20 starting wage for associates while claiming to offer attractive pricing for its customers.

“Two thumbs up for Addie’s!” wrote David Spear, senior partner, industry consulting, retail, CPG and hospitality at Teradata. “I love to see new companies get into the mix. If they’ve done an excellent job of re-imagining the pickup business, there’s no reason it can’t succeed. I’m rooting for them!”

“We believe that taking better care of busy families should be done in a way that also takes care of our team, our community and our planet,” said Jim McQuade, co-founder and CEO of Addie’s, in a statement. “With our seed funding, we’ve built an end-to-end experience to serve people in and around Norwood in a way that can be replicated in suburbs nationwide. We look forward to quickly expanding, offering busy families across the country drive-up grocery convenience without compromise.”

Some RetailWire BrainTrust members suggested things Addie’s should look out for as they try to fill the niche.

“Key to success will be evaluating not only the literal P&L of the store, but also the impact of its presence which should help lift all sales at similar stores in the area,” wrote Doug Garnett, CEO of Protonik. “In this way, I expect minimizing size and maximizing visibility of the store will have an impact beyond literal store orders.”

“While part of the reason for pickup is reduced transportation costs, the other part is add-on sales once the customer is in the store,” wrote Nicola Kinsella, SVP of global marketing at Fluent Commerce. “If that’s not an option, you need a really good promotional program that inspires add-on items during the post-purchase experience.”