News Analysis: Jet Ending New York Fresh Food Delivery

Walmart is scaling back Jet operations in New York by eliminating its fresh-food delivery business in the city as the company pursues a larger online consolidation with the intent of most effectively building its digital business.

Fresh food delivery was part of a comprehensive urban strategy developed to establish Jet as a go-to online retailer for city dwellers. Just last year, Walmart launched Jetblack in New York, a separate platform focused on affluent urbanites with a text-based concierge-style business model. Walmart recently said it was shifting Jetblack co-founder Jenny Fleiss, who has been the face of the operation, from day-to-day supervision to a broader range of duties. Walmart appointed the other co-founder, Nate Faust, Walmart.com svp/logistics, as her replacement as Jetblack CEO.

As part of the Jet move, Walmart is shutting down fresh food operations at a recently launched Bronx distribution center, according to published reports. The company had developed the DC specifically to support the expansion of Jet’s capabilities in New York, an initiative that Walmart intended to proceed as a model it could emulate in other urban centers.

In response to a question from HomeWorld Business, Walmart responded with a statement:

“We learned a lot by testing Jet fresh grocery delivery in New York City, and we recognized the important role our stores play in providing an efficient way to offer groceries to customers through pickup and delivery. We will focus our grocery pickup and delivery in markets where we have this incredible opportunity. Jet will continue to offer millions of dry grocery and general merchandise items to customers in major metros like New York City. And, we’ll continue to test bold concepts that can offer convenience to customers.”

In a market where customer acquisition costs have become an issue for online retailers, reports have suggested Jetblack and expanded operations launched by Jet in New York had become prohibitively expensive. At the same time, urban Millennial consumers, who had been a critical target of Jet and related Walmart efforts, began having families and moving to the suburbs where the multifaceted omnichannel retail proposition the company currently extends will likely prove attractive to a considerable proportion of younger shoppers settling into new lifestyles.

Even as it was consolidating e-commerce acquisitions, Walmart began rolling out curbside grocery pick up and other omnichannel programs that leveraged its physical stores and its distribution system, which always has been the company’s fundamental advantage. Although both Jet and Jetblack continue to operate, Walmart’s moves there, as well as consolidation of its online retail portfolio, provide some indication that the company is once again becoming more focused on generating additional sales from its main shopping demographics, from lower income to middle class consumers in suburban and rural communities.