When Walmart CEO Doug McMillon needs a bottle of wine, he doesn’t have to wait long, thanks to a fleet of drones servicing his neighborhood in Bentonville, Arkansas.
Speaking of yesterday Morgan Stanley At the Global Consumer & Retail conference in New York, McMillon told the story of when his wife was cooking chicken marsala recently and realized they didn’t have the right wine. “We had a drone delivery in less than 15 minutes,” he said. “Where I live now, Walmart can deliver to our home in a cooler in our garage,” he said.
“Walmart picks up my garage door, puts it in there, and takes it down.”
Although Walmart recently suspended drone delivery in a number of states, citing high delivery costs, McMillon still sees hyper-local, super-personal service — including by drone — as part of Walmart’s bigger-picture strategy, which he described as “price range.” “
“Our future looks like big baskets that move slowly by value and rush deliveries that happen in very quick time in different ways,” McMillon said.
He added that Walmart’s newly launched membership program—in line with the Amazon Prime—which includes the aforementioned home delivery for an additional $7 per month—will play an increasingly important role in the company’s strategy. Walmart currently offers traditional delivery for between $8 and $10, and drone delivery can cost as much as $30.
Bentonville-based Walmart launched drone delivery to four million Americans in December 2022. This January, the retailer expanded drone service to 1.8 million homes in the Dallas-Fort Worth metro area through a partnership with Google-backed Wing and Zip lines. Last quarter, the world’s largest retailer and Fortune 500 veteran, reported consolidated revenue of $169.6 billion, an increase of 5.5% over the same quarter last year with adjusted earnings per share up 14% to $0.58.
Although the overall drone delivery market is as expected to reach $65 billion by 2032, Walmart’s rival Amazon has the upper hand, last month receiving FAA approval to test new quieter drones. Further complicating matters, just seven months after the Dallas expansion, Walmart partner DroneUp allegedly reduced delivery to 15 Walmart locations, citing problems with shipping rates for smaller packages.
Such delays don’t hurt Walmart much. Although Morgan Stanley raised its price target on Walmart to $89 last month, the stock beat expectations, hitting $93 today, and is up 75% this year. In the same period, the S&P 500 rose by 27%.
As drone delivery prices fall and stabilize, McMillon expects the ability to charge more for drones delivering the most important packages will change the face of retail. As he told the Morgan Stanley audience, “The experience is kind of magnified as all these things come together to make it work.”
