Wal-Mart’s New Shipping Idea is Crazy…Or Is It?

 
on March 29 2013 3:50 PM

Drastic times call for drastic measures, and Wal-Mart (NYSE:WMT) is facing stronger competition than ever from the likes of Amazon (NASDAQ:AMZN). In efforts to speed up delivery times and save on shipping costs, the Bentonville-based low-cost king is proposing a truly drastic measure: shipping online orders to customers via shoppers who are in the store anyways.

Sometimes, a company announces something so out of the ordinary that it attracts double takes, and this is one of those times.

Upon closer examination, turning customers into couriers may not be as outlandish as it sounds. Numerous start-up businesses have dedicated themselves to helping people maximize the efficiency of their belongings, such as a spare room in their house, their car, or even a cocktail dress. Wal-Mart, in effect, would be applying a similar principle to its shoppers. A person could rent out space in his vehicle and deliver an order or two in exchange for some sort of compensation.

Of course, there are tremendous legal and liability issues to consider here, to say nothing of privacy problems. Wal-Mart says this is still in the earliest of stages of development, and the nuts and bolts have not been figured out yet.

“I see a path to where this is crowd-sourced,” says Joel Anderson, chief executive of Walmart.com in the United States, in an interview with Reuters. Wal-Mart has millions of customers visiting its stores each week, he explained. Some of these shoppers could tell the retailer where they live and sign up to drop off packages for online patrons who live on their route back home.

In return, Wal-Mart would offer a discount on that customer’s shopping bill, effectively covering the cost of their gas in return for the delivery of packages, he added.

“This is at the brain-storming stage, but it’s possible in a year or two,” explains Jeff McAllister, senior vice president of Walmart U.S. innovations. Wal-Mart currently uses FedEx (NYSE:FDX) and other delivery services to move products stores to the buyer, and is making a huge push for shipping directly from the stores, rather than a warehouse, to cut down transport costs.

“I’m sure it will be a test in some stores,” said Matt Nemer, an analyst for Wells Fargo Securities. “But they may only keep it for metro markets and for higher-priced items.” He admitted that nation-wide adoption of the program — some 4,000 stores — would be very unlikely.

Unlike UPS (NYSE:UPS) or FedEx, who have insured drivers, the legal ramifications from such a program would present Wal-Mart with numerous legal dilemmas, such as theft, fraud, delayed delivery, and so on.

“You are comfortable with a FedEx or UPS truck in your driveway, but what about a stranger knocking on your door?” Nemer pointed out.

Zipments, a crowdsourcing base for delivery services, has been plodding through the red tape since it began. Co-Founder Garrick Pohl said that the company has been more serious about screening drivers, and although thefts and fraud have yet to be a problem, insurance and licenses were an obstacle. Drivers often need personal liability insurance to cover package delivery activities, and cargo insurance is also needed. Zipments self-insures this risk up to $250, but the firm encourages its couriers to buy additional coverage for higher-value packages, Pohl said.

In some areas, like downtown Chicago, people also need a courier license to deliver things, he added. ”Zipments now helps people get all these things set up before allowing them to deliver goods.”

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