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What Went Wrong With Walmart’s Employee-Driven Delivery Service

Walmart‘s associate-delivery pilot program won’t be taking off after all.

Last June, the company announced that it would test a new strategy to get online orders to customers’ front doors, assigning store associates to deliver packages on their way home. The program was rolled out in three locations — two in New Jersey and one in northwest Arkansas, near the company’s Bentonville headquarters — and employees were offered additional pay and fuel reimbursement to take on the added work.

It seems that wasn’t enough to make the idea stick, as Reuters reports that Walmart quietly shuttered the program in January, pivoting away from its latest scheme to compete with Amazon on last-mile delivery.

Employees who participated told the publication that they were concerned about liability in case they lost a package or got into an accident during a delivery, since they were required to use their own vehicles and insurance policies. Some also complained about poor compensation: Walmart offered $2 per package, amounting to an extra $6 to $10 for a typical route, plus an extra hour of overtime pay and 54 cents per mile in fuel reimbursement. (The standard federal mileage rate was 53.5 cents per mile in 2017.)

According to Reuters, participants said they lost at least 30 minutes of unpaid time waiting to collect items at the end of their shifts, adding that a typical delivery schedule of five packages generally took more than two hours to complete, though they received only an extra hour of overtime pay.

Walmart confirmed  that it put a stop to the program but contended that all employees earned overtime pay after they exceeded 40 hours per week.

The problems highlight a particular challenge for retailers that want to leverage their brick-and-mortar stores for e-commerce deliveries — namely, that most aren’t designed with the same logistical efficiencies as distribution facilities. Another competitor, Target, made a major investment to circumvent this issue last year, acquiring same-day-delivery startup Shipt in December 2017 for $550 million, with plans to roll out such a service to most of its 1,835 stores by the end of this year.

Walmart is now testing a more limited version of associate delivery in Woodstock, Ga., tasking just four employees with delivering groceries and related items to local customers. The company has 4,700 U.S. stores within 10 miles of 90 percent of the country’s population, though, so expect its efforts to conquer last-mile delivery to continue.

“There are many different ways we can deliver items to our customer’s door,” the company told FN in an email statement. “We’re testing different ways we can do that, from expanding delivery to using the third-party providers to potentially using our own associates. The first associate delivery pilot ended early this year, and we’ve taken what we learned to develop a very different version of associate delivery that provides an improved experience for our customers and associates. The pilot has been running in one store in Georgia for the last few months and we’re encouraged by what we’re seeing.”

(This article was updated on July 30, 2018 at 12:30 p.m. ET to include a statement from Walmart)

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