From my vantage point in Pittsburgh, I’ve grown accustomed to seeing Uber’s driverless vehicles around town due to Uber’s partnership with Carnegie Mellon University’s National Robotics Engineering Center. But I still found myself surprised by Chrysler Pacifica’s new TV campaign with Jim Gaffigan quite comically demonstrating the vehicle’s self-parking capabilities. I didn’t expect to see revolutionary driverless technology this soon on a freakin’ minivan (excuse me, crossover).
So, when I saw some of the biggest recent CPG news, I couldn’t help but also see a collision (I know, an unfortunate word choice when we’re talking driverless cars) of forces ready to transform the CPG industry in the next five years. Here’s a quick snapshot of those colliding forces:
This week, Walmart announced it is slashing prices on produce, consumables and OTC medications in response to planned rapid expansion by European discount grocery chains Aldi and Lidl. Yahoo Finance reported in a price check last year that Aldi’s prices were approximately 30% less than Walmart’s. Walmart’s announced pricing rollback is an attempt to blunt Aldi and Lidl’s expansion.
Business Insider forecasts that, by 2020, there will be 10 million cars with self-driving features on American roads.
Last week at its annual shareholders meeting, Walmart announced that it would explore partnerships with Uber and Lyft as it seeks to expand its home grocery delivery service. In test locations, the consumer will order online, personal shoppers will fulfill the order and an Uber or Lyft driver will deliver to the consumer’s home for a fee of $7 to $10.
GM and its partner, Lyft, hope to have a fleet of driverless taxis running within the year.
If 7 to 10 bucks doesn’t seem like enough money to pay for a car and driver to deliver groceries to your home, you’re not alone. But if you’re looking at where the technology is going and how rapidly technology costs get reduced (techies will recall Moore’s law, which observed chip computing power doubled every two years), it’s pretty easy to see how Walmart can deliver groceries via driverless (and electric cars — another major cost reduction) with that cost model in mind.
With more than 5,000 stores across the country, Walmart is within a 15-minute drive of 90% of all Americans. Aldi and Lidl have that kind of scale in Europe, so Walmart can ill afford to let them get a toehold in the United States, especially with a significant pricing discount versus Walmart. Hence, the rollback on Walmart produce and consumable prices to make the U.S. market a lot less attractive to Aldi and Lidl management.
Then Walmart can turn its attention to combating online retail behemoth Amazon. Those 5,000+ Walmart stores within a short drive of 90% of the U.S. population puts Walmart in a pretty advantageous spot to solve the “last mile” issue for consumers. Think of those stores as a network of close-to-the-consumer distribution centers, which they are. Now, add a fleet of driverless cars (which Walmart needn’t own, just invest in as a partner) that can inexpensively deliver over the critical “last mile” and you’ve given consumers a pretty terrific option: Come in and shop to suit yourself, or for $7 to $10, let Walmart do the shopping and delivery for you.
Conversely, Amazon fulfillment centers, according to Piper Jaffray, are within 20 miles of just 31% of the U.S. population. While Amazon has succeeded with an amazing one-hour grocery delivery service in more than two dozen metropolitan markets, it’s going to be hugely difficult for them to expand grocery home delivery consistently across the country. With Walmart’s small town roots, they’ve long since built that close-to-last-mile network.
Who wins? My bet’s on Uber.