Dive Brief:

• Walmart has partnered with Instacart to offer same-day delivery to customers in select U.S. markets, according to a report from CNBC.
• During the pilot, Instacart will offer delivery from Walmart stores in Tulsa, Oklahoma, and in three California markets: Los Angeles, San Francisco and San Diego. Like it does with many of its partners, Instacart will deliver groceries, alcohol, household essentials and more from Walmart in as little as an hour.
• This is the first time Walmart's main U.S. stores have offered Instacart delivery. The retailer's Canadian division offers service through Instacart, and Sam's Club has offered Instacart delivery since 2018.

Dive Insight:

Walmart and Instacart are expanding their relationship in an attempt to battle Amazon, Target and other retailers as consumers keep buying groceries online during COVID-19. 

Same-day delivery has become an essential service for grocers as online buying becomes part of many shoppers’ routines. Walmart has offered same-day delivery for a couple years now through a collection of third-party services. It could reach even more shoppers through Instacart, which says it reaches more than 80% of North American households.

The launch with Instacart follows a reported delay in the introduction of Walmart+, Walmart’s own version of an annual subscription service that was supposed to kick off in July, and which would include grocery delivery. The service is seen as Walmart’s answer to Amazon Prime. 

Walmart and Amazon have been fiercely competitive when it comes to digital grocery sales. Amazon has been able to maintain an edge over Walmart with its vast marketplace, but Walmart has been rapidly gaining market share in online grocery and has long been the top grocery seller in the U.S. With COVID-19, both businesses have seen sales accelerate dramatically as digital growth has redrawn competitive lines. According to a recent statement from Amazon CEO Jeff Bezos, Instacart is now also seen as an Amazon competitor. 

Walmart previously resisted a partnership with Instacart for its main U.S. stores, opting instead to manage its own pickup and same-day delivery infrastructure and run partnerships with providers like DoorDash, Deliv and Postmates. Initially, the retail giant had issues with Instacart’s request to list products in its app, rather than just allowing Walmart to use Instacart for fulfillment, according to Recode. 

Last year, Instacart made a breakthrough when Walmart Canada began utilizing the platform. Combined with Instacart’s collaboration with Sam’s Club stores in the U.S., these developments have given Walmart a good look into how customers will respond to an expanded partnership. 

Working with Walmart in the U.S. is another feather in the cap for Instacart, which currently partners with large retailers like Kroger, Target, Albertsons and Aldi. The grocery delivery platform has seen considerable growth in recent months and is now valued at $13.7 billion.