E-commerce investment pays off for Walmart

Internet Retailing

22nd Aug 2017

Walmart reported US$123.4 billion in revenue in Q2 FY18, a 2.1 per cent uptick from the previous corresponding period largely due to the retailer’s strong e-commerce performance.

Online sales grew 60 per cent in the quarter, while gross merchandise volume (total sales dollar value of goods sold through the marketplace) grew 67 per cent.

The world’s largest retailer defines online sales as any transaction initiated through Walmart.com, including ship-to-home, ship-to-store, pick up today and online grocery, as well as transactions through Jet.com and other sites in its family of brands.

Since acquiring e-commerce company Jet.com in August 2016, Walmart has bought a slew of online businesses, including ShoeBuy, Moosejaw, Modcloth and most recently Bonobos.

In a statement to shareholders last week, Walmart said the majority of its e-commerce growth was organic through Walmart.com, including online grocery, which is growing quickly.

“We’re delivering growth through an improved customer value proposition that includes free two-day shipping on millions of items and ‘Easy Reorder’, as well as an expanded assortment, now with more than 67 million SKUs – an increase of more than 30 per cent from the first quarter,” said Brett Biggs, Walmart’s executive vice president and chief financial officer.

“With Easy Reorder, we’re integrating both in-store and online purchases to provide customers with a single spot to view and repurchase the items they buy most frequently. Initiatives like these, along with everyday low prices, are the reasons why customers are choosing Walmart in greater numbers.”

Walmart president and CEO Doug McMillon went one step further, drawing a direct comparison with Amazon.

“[Customers] love not having to pay a membership fee to get Walmart’s free two-day shipping on millions of items. And, we’re seeing a nice increase in customers receiving discounts for picking-up non-store items at their local stores,” he said.

Commenting on the company’s performance, Neil Saunders, managing director of GlobalData Retail, acknowledged that the company’s 3.3 per cent uplift in total US sales looked weak compared to Amazon’s 17 per cent increase in retail sales over a similar time frame.

But he said the gains are significant in monetary terms. While Walmart US took US$2.5 billion more than the same period last year, Amazon added US$3.5 billion to its retail sales line on a global basis.

Saunders was also supportive of the retailer’s recent e-commerce acquisition, since the addition of firms like Moosejaw, Shoebuy and Bonobos expand the company’s reach into higher margin categories, niche areas, and more affluent shopper segments.

“The results of the efforts made in digital are evident from the 67 per cent increase in online gross merchandise value over the period. Acquisitions made a big contribution to this, but schemes like free two-day shipping and discounts for products collected in stores have also increased shopper numbers and encouraged more people to use Walmart.com,” he said.

“All in all, we believe that Walmart is making considerable progress in online and is using its significant scale and reach through stores to its advantage.

“In our view, Walmart is a demonstration that traditional businesses can survive and thrive in this era of retail if they are prepared to adapt and evolve.”