Walmart’s Jet to cease its NYC fresh grocery business

Bloomberg

Walmart Inc’s Jet subsidiary is ending its fresh-food delivery business just a year after introducing the service in New York City, another sign that the urban-focussed site is scaling back.
The retailer will close a warehouse in the Bronx it was using to prepare orders and also let some drivers go, resulting in the loss of between 200 and 300 jobs, according to a person familiar with the decision. Jet — which will continue to sell dry groceries like cereal and other general merchandise — was expected to inform customers of the news and fulfill any existing orders already placed.
Since its launch last fall, Jet’s fresh-food service has struggled, according to three people familiar with the business. The company has resorted to raising prices to offset the hefty costs of fulfilling orders in the nation’s biggest city. Key executives left, and in recent months items like avocados and strawberries have been out of stock.
“We learned a lot by testing Jet fresh grocery delivery in New York City,” Walmart said in an emailed statement. “We’ll continue to test bold concepts that can offer convenience to customers.”
The move is the latest example of the declining importance of Jet, a business Walmart paid $3.3 billion to acquire in 2016 to reach urban millennials and gain the services of co-founder Marc Lore, who has taken over Walmart’s US e-commerce operations. The company’s online revenue has increased — but most of the unit’s success has come from its popular curbside grocery pickup service, which is cheaper to operate than home delivery.
Jet’s customer traffic, sales and overall relevance inside Walmart’s sprawling retail empire, meanwhile, have dwindled. Its staff was fully integrated into Walmart over the summer and the parent is losing patience with some of the expensive online ventures that generate buzz but crimp profits. This prompted Walmart to sell women’s clothing site ModCloth and explore a spinoff of shopping concierge service JetBlack.

‘City Grocery Experience’
Jet debuted what it dubbed its “City Grocery Experience” last September, opening a 200,000-square-foot distribution centre in the Bronx, hiring executives from companies like PepsiCo Inc and splashing ads over New York City buses and subway stations. Jet hoped to lure New Yorkers away from established online-grocery players like Fresh Direct, Ahold Delhaize’s Peapod and Amazon.com Inc, in part by offering upscale local brands such as Orwashers breads. Jet planned to expand the service to other cities.
“It’s the next generation of shopping for city dwellers,” Lore said at the time. That same month Jet rented out a five-floor, 10,000-square-foot Greenwich Village townhouse for a party to celebrate its new direction.
But the service stumbled from the start. The Bronx warehouse opened before it was fully ready, according to one of the people, and workers there had to resort to using portable space heaters to keep the facility warm.
At first, Jet’s prices were slightly lower than its online rivals on a typical basket of goods, according to an earlier analysis.