Invest1 publisher3 min readPublished
Walmart puts Papa John's on its own app and its own contractors
The largest retailer in the United States is now taking restaurant orders on its own app and delivering them with its own contractors. That puts Walmart opposite DoorDash and Uber Eats on the same pizza.
The Investor · Invest desk
What happened
- Walmart launched restaurant delivery on the 10th with Papa John's, according to a Bloomberg report on the 13th, extending an app that already sold groceries, household goods and prescription drugs.
- Orders placed on Walmart's app or website arrive within 30 minutes, either on their own or delivered together with the rest of the customer's cart.
- Walmart manages the order intake, the fee structures and the driver dispatch, and Spark independent contractors that the company operates directly carry the food.
- The service is starting in select areas and is set to expand to thousands of Papa John's locations across the United States.
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Why it matters
- exposure DoorDash and Uber Eats now face a competitor whose revenue on the same order includes grocery margin they never earn, so the pressure lands on price per order before it lands on volume.
- constraint Every Spark hour spent on a 30-minute pizza run is an hour Walmart cannot sell to the GoLocal retailers already renting the network. The company now has to ration driver capacity it had been monetising twice.
- precedent Taking an outside restaurant chain on as a seller gives other chains a template for listing with a retailer that owns the last mile, and a second fee schedule to negotiate against.
- contradiction The same instant-delivery demand pushes Korean grocers the opposite way, onto other companies' apps, so owning stores and drivers is not sufficient to become a platform where operating-hours law bites.
A pizza ordered on DoorDash pays the platform a fee and nothing else. The same pizza ordered on Walmart's app pays Walmart a fee, and Bloomberg reports that Walmart products are included in 65% of the company's restaurant orders [8]. Sixty-five baskets in every hundred carry retail margin on top of the delivery charge [18]. Walmart manages the order intake, the fee structures and the dispatch [5], so the fee is a number it chooses. It did not disclose what that number is.
The 65% was earned under a narrower arrangement. Subway and Dunkin' were partners operating inside Walmart stores; Papa John's is an outside brand [6]. A shopper who buys a sandwich made in the building was probably in the building already. If outside chains attach groceries at a materially lower rate, Walmart ends up selling fee-only delivery on a driver network it built for baskets.
Spark is a network of independent contractors Walmart operates directly [4], and Walmart rents the same network to other retailers through its GoLocal business, using each store as a logistics base [10]. A driver hour spent on hot food on a 30-minute clock [2] cannot also go to a GoLocal client who has already bought it. Coverage is the easy part: about 90% of the US population lives within 10 miles of one of roughly 4,600 stores [9].
South Korea shows the same instant-delivery demand producing the opposite structure. Under the Distribution Industry Development Act, in force since 2012, hypermarkets cannot operate from midnight to 10 a.m. and must designate two closing days a month [11]. In a 30-day month that removes 328 of 720 hours, about 46% of the clock, from store-based delivery [19]. There were 307 hypermarkets in Korea as of July, according to the Ministry of Trade, Industry and Energy [12], one for roughly every 15 Walmart stores [20]. Korean hypermarkets and the supermarket chains known as SSMs are listing on outside delivery apps instead of running their own [13]. "To compete with platforms that operate 24 hours a day, delivery also has to run 24 hours a day, and the law blocks that premise," an industry official told Seoul Economic Daily [15]. "Listing on existing delivery apps is the realistic choice," the official said [16].
"We are focused on broadening restaurant options and giving customers more choice," said Greg Cathey, senior vice president of Walmart's e-commerce division [14].
For DoorDash and Uber Eats [7] this is a pricing problem: Walmart can quote less on the same pizza and still clear its cost while a grocery basket rides on two orders in three. Outside brands could attach well below 65%, leaving Walmart with the fee alone. Or Spark contractors, already serving GoLocal clients and same-day pharmacy runs, get paid up to take the pizza job, and a 30-minute window is tighter than the same-day window Walmart quotes on prescriptions and refrigerated medicines [17].
What to watch
- Whether outside chains attach Walmart merchandise at anything near the 65% rate the in-store partners produced.
- Whether Spark contractor hours get rationed between GoLocal clients, same-day pharmacy runs and 30-minute hot food.
- A date, and a store count, for the expansion beyond the select launch areas to thousands of Papa John's locations.