By Siddharth Cavale
NEW YORK (Reuters) - Walmart (NYSE:WMT) will pay independent delivery drivers new financial incentives to pick up online orders at its U.S. stores and deliver them to shoppers during the holiday season, the retailer told Reuters.
The move is part of Walmart's strategy for boosting sales to upper-income households and competing with e-commerce rival Amazon.com (NASDAQ:AMZN), which is selling more everyday essentials to shoppers that it delivers in a day or two.
Josh Havens, spokesperson for the world's biggest retailer, said the company would offer delivery incentives and more earning opportunities to existing drivers. He declined to provide details.
U.S.-based Walmart relies on a loosely organized network of thousands of freelance drivers who download a Walmart-designed app, Spark Driver, to their cellphones.
"Spark Driver is very important to Walmart ... because it helps grow e-commerce sales and Walmart Plus subscriptions," said Arun Sundaram, senior vice president at CFRA Research, referring to its membership program.
Walmart's global e-commerce business surpassed $100 billion in sales in 2023, and Chief Financial Officer John David Rainey said in June he expects its U.S. e-commerce business to turn a first profit in the next year or two. Walmart is focused on improving its e-commerce margins by delivering more goods to shoppers' homes directly from its stores using Spark Driver, he said previously.
VARYING PAY
Spark Driver pay varies according to order size and distance. If an online shopper requests delivery to an apartment, or of heavy items such as furniture, drivers earn more, according to Walmart.
Gridwise, a data-analytics company that helps drivers track their earnings, reports that from October 2023 to September 2024, Spark Drivers earned a gross average of $21.90 per hour and $12.26 per trip. Joseph Wilson of Bloomington, Indiana, a Spark Driver since 2022, said payouts can be unpredictable, however.
"There doesn't seem to be any logic behind how they estimate driver payouts before tips," he said. "I can receive an order for seven items for $20 (pay) or an order of 50-plus items for $7. It's really frustrating."
To broaden its delivery service's appeal to shoppers, Walmart slashed the annual fee for its Walmart Plus membership, by 50% ahead of the holiday season. Walmart Plus members receive unlimited free same-day deliveries from stores on orders over $35.
The retailer is offering U.S. shoppers a one-year membership for $49 through Dec. 2. Walmart Plus is on track to reach 32 million members by year-end from 29.2 million in 2023, research firm Emarketer estimates.
Amazon is also taking aim at Walmart with a $99.99-a-year add-on fast grocery delivery service for Amazon Prime members.
Amazon Prime membership costs $139 per year. The e-commerce giant has 180 million U.S. Prime members, according to Consumer Intelligence Research Partners.
Quick store-to-home deliveries have helped Walmart boost its market share as more upper-income households subscribe to Walmart Plus, the company said in February, without providing details.
With more subscribers, Walmart can potentially earn more advertising revenue from consumer products and food companies pitching their brands on Walmart.com, Sundaram said. Walmart sells ads to its suppliers through its highly profitable Walmart Connect retail media business that generated about $3 billion in 2023.
Spark Driver suffered a data breach in February, according to Walmart, where hackers stole personal data from Spark Driver accounts, including Social Security numbers. Two drivers who spoke to Reuters said scammers used this data to create profiles and impersonate drivers.
Walmart spokesperson Havens said the retailer has simplified incentives ahead of the holidays and improved safety features, such as stricter password requirements and selfies to log in. Walmart is also piloting physical ID checks at some stores.
Walmart executives will provide their holiday-season outlook with third-quarter results on Nov. 19.