Walmart’s Jet.com to Open E-Commerce Fulfillment Center in New York City

Jet to Open E-Commerce Fulfillment Center 2nd

KEY POINTS

  • Walmart-owned Jet.com is planning to lease a fulfillment center in the Bronx borough of New York City. The new warehouse will enable Jet to offer same-day delivery of groceries and selected merchandise and to significantly reduce its current delivery time of two days.
  • Jet’s new fulfillment center will be in the right market to appeal to its core consumer base of higher-income urban millennials.
  • Jet will face significant competition from entrenched same-day delivery services such as Amazon Prime Now and FreshDirect.

Jet.com Deepens Its Presence in the New York Market

News media reported on July 10 that Jet.com will open a fulfillment center in the Bronx borough of New York City later this year. The e-commerce retailer, which delivers everything from groceries to computers, was acquired by Walmart for $3.3 billion in 2016. The Bronx fulfillment center will enable Jet to offer same-day delivery of groceries and selected merchandise in New York for the first time. The center will initially deliver only Jet products, not Walmart goods. Jet stressed that its same-day delivery service will adhere to tight arrival windows, something the company believes is vital to customer satisfaction with rapid delivery.

The Bigger Picture

Walmart currently has no physical stores in New York City, but Jet’s same-day delivery service will enable Walmart to compete with established same-day delivery services in the area. These include Amazon Prime Now, which offers one- and two-hour delivery of groceries and certain Amazon items, and FreshDirect, which recently began offering same-day grocery delivery. Amazon’s acquisition of Whole Foods Market provides another potential avenue for Amazon to compete on same-day grocery delivery in New York: there are currently 13 Whole Foods locations in New York City, each of which can potentially serve as a fulfillment center from which Amazon can offer same-day delivery service.

What We Think

Since its acquisition two years ago, Jet has quickly become Walmart’s primary vehicle for appealing to demographics that tend not to shop at traditional Walmart stores—namely, wealthy urban millennials. New York City may be a prime location for Jet to appeal to its target demographic: in 2016, the city was home to 1.6 million millennials (who accounted for almost a fifth of the city’s total population) and to 12% of all American millennials earning over $100,000, according to a report from the Office of the New York City Comptroller.

Although the Bronx fulfillment center will position Jet well to appeal to its core consumer base in New York City, the company will face significant competition from entrenched same-day delivery providers. The retailer will have to quickly differentiate itself from these existing services if it intends to compete in the New York market.