(CNN) — Walmart may be delivering the next power drill or can of paint you order from Home Depot.
Walmart in August launched a new service called GoLocal to deliver goods to customers on the same day or the following from other businesses’ websites. Home Depot is the first customer for the service, the two companies said Wednesday.
Walmart is looking for ways to grow beyond its main retail business and build new revenue streams in areas such as advertising and fulfillment services for merchants. The GoLocal service is part of this strategy.
The retailer is betting that it can use its vast footprint in the United States and its logistics expertise to offer speedy deliveries, especially in suburban and rural markets that it believes are underserved by parcel carriers and others, such as Amazon and Shipt, which is owned by Target.
Walmart is using independent contract drivers on its in-house Spark platform to deliver items from Home Depot and other merchants. Home Depot’s whole catalog won’t be available for delivery through the service — just tools, paint, fasteners and other supplies that “easily fit in a car,” according to a news release. The delivery option from Home Depot will be available to customers in Texas, New Mexico and Arkansas in the coming weeks, with plans to expand to more areas by the end of the year.
Stephanie Smith, senior vice president of supply chain for Home Depot, said in the announcement that the tie up with Walmart “brings us even closer to our goal” of offering same-day delivery or next-day delivery to 90% of the United States population. Home Depot currently offers these deliveries through a partnership with the same-day delivery platform Roadie.
For Walmart, the agreement is a “huge win,” said Scott Mushkin, the CEO of the retail consulting firm R5 Capital, in an email. Home Depot, one of the largest retailers in the country, partnering with Walmart “suggests that Walmart’s solution is resonating in the marketplace,” Mushkin said. He predicted it will lead other companies to sign up for the delivery service.
Walmart US CEO John Furner said at an investor conference last month that batching online orders together from Walmart and other businesses “lowers the cost of delivery” and keeps drivers on the Spark platform by giving them additional work outside of only making Walmart deliveries. Until now, Walmart has relied on Spark drivers to deliver online orders from its stores in around 500 cities.
Last-mile delivery is typically a money-losing venture, and Walmart will need to pull a large number of orders together to make deliveries profitable, some retail analysts have cautioned. The company also faces stiff competition in the logistics space from companies that are expanding same-day shipping options. UPS last month said it was acquiring Roadie.
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