Walmart is doubling down on micro-fulfillment for pickup and delivery

  • Walmart is doubling down on micro-warehouses within its own stores.
  • The company announced that it is “scaling” its local fulfillment centers within stores, adding dozens to its fleet after a successful pilot in New Hampshire. 
  • To reap the benefits of micro warehousing, Walmart is relying on three companies: Alert InnovationDematic and Fabric. 
  • Visit Business Insider’s homepage for more stories.

Walmart is embracing micro-warehousing technology across its stores, in order to dominate competitors like Amazon and Target in the push for faster, cheaper fulfillment.

The company launched its first “local fulfillment center” in Salem, New Hampshire, back in 2019. At this store, a fleet of personal shoppers gathers items for robots to assemble for online pickup or delivery orders . Now, Walmart is expanding this tech venture.

Speaking on a call with reporters on Tuesday, Tom Ward, Walmart’s senior vice president of customer product, announced that the retailer will open dozens of small fulfillment centers — stocked with thousands of products, and cloistered away from the sales floor — within its existing stores. 

Walmart locations doubling as local fulfillment centers will see orders of fresh and frozen food items — as well as other categories like electronics — collected and stored for pickup. The fulfillment centers will either be constructed within Walmart locations, or added as an extension of the store, according to the company. As is the case in the Salem, New Hampshire, store, automated robots will be located inside fulfillment centers away from the public to complete orders.

Read more: Logistics startup Fabric has raised $136 million to build shipping warehouses in unused real estate like retail stores and gyms

Ward said that the process will lead order times to drop to “just a few minutes,” while freeing up in-store workers and streamlining work for personal shoppers. The goal is for these local fulfillment centers to ultimately complete orders for a string of nearby Walmart locations, not just one store.

The move is also a direct response to a surge in online shopping witnessed by the Arkansas-based retailer during the pandemic. Walmart this month disclosed peak 300% growth in pickup and delivery orders during its first quarter of 2020. 

Meanwhile, micro-warehousing has emerged as a viable way for companies to deliver goods in a quicker and cheaper fashion than traditional fulfillment centers allow. For one, ordered goods by customers are seemingly within arm’s reach. And Plenty of startups have sprung up in hopes of helping direct-to-consumer brands and smaller chains leverage smaller warehouse nodes.

The vendors helping Walmart expand micro-fulfillment

To expand this mode of fulfillment, Walmart is working closely with three technology companies: Alert InnovationDematic, and Fabric.

Founded in 2013, the Massachusetts-based Alert Innovation is an e-grocery technology startup focused on micro-fulfillment and online ordering support. The company has a history with Walmart. The retailer and the technology startup partnered on the Alphabot project in 2016.  

In a statement sent to Insider, Alert Innovation CEO and founder John Lert said Walmart was “the first food retailer to recognize the need to automate fulfillment of online orders at store-level.” 

“Walmart’s announcement is exciting as it’s the largest deployment of automated micro-fulfillment technology announced to date by any retailer and represents a major step in the evolution of local fulfillment,” he added. “The team at Alert Innovation is proud to join Walmart on this journey and look forward to helping them better serve their customers in this new way at scale.”

Dematic is a logistics company originally founded in Germany in 1819. Today, it is a supply chain optimization firm based in Atlanta. Dematic president and CEO Hasan Dandashly said the company has “helped automate some of the world’s biggest distribution centers,” and now it is seeking to optimize “the smaller footprints found in the backs of retail stores.”

“Micro-fulfillment is a demonstration of our mission to power the future of commerce, leveraging our expertise in automation and our scale to enable Walmart to set a new standard for order fulfillment,” he said.

Finally, Fabric, founded in 2015, was originally based in Tel Aviv. Now, the robotics-focused micro warehousing outfit operates out of New York City. Insider’s Madeline Stone reported that Fabric locations are typically based in cities, and can fulfill 500 orders a day. The company has raised $136 million in venture-capital funding.

Elram Goren, co-founder and CEO of Fabric, told Insider that the company is seeking to bring Walmart “modularity and elasticity” through micro-warehousing.

“Having the largest retailer in the world and the leading innovator in the online grocery space as our customer is an honor, and this is a true testament to the speed, efficiency, and scalability of our solution,” Goren said. “As we expand our presence in the US, we hear from our retail partners that they need a flexible solution that can fit into any space. This is critical for leveraging existing real estate by building micro-fulfillment centers into existing store footprints, a model that will be core to scaling.” 

Ward said that Walmart will be “testing different orientations and add-on innovations to understand what works best in different environments” alongside selected vendor technologies. 

The new slew of in-store local fulfillment centers is just the latest push by Walmart to test and tweak its fulfillment capabilities and best leverage its fleet of stores. The company previously embarked on trials involving flying drones, piloting automated trucks, and switching around 200 stores to more closely reflect the retailer’s mobile app.

In November, the company even cancelled its experiment with robotics company Bossa Nova, after finding that it was easier to allow employees to stock shelves rather than towering robots. This latest micro-warehousing venture proves that, while Walmart determined that the shelf-stocking robots were unnecessary, the retailer still believes it could have a place in its stores for automated technology — just one out of the customers’ sight.