- Walmart proved to be the victim of its own success on Tuesday.
- “Our basic in-stock e-commerce suffered as a result,” McMillon said on a conference call
Walmart proved to be the victim of its own success on Tuesday.
The discount retailer’s shares plunged 10 percent after it unnerved investors by reporting a sharper than expected decline in online sales growth. Walmart said that online U.S. sales had risen 23 percent during the holiday quarter, a far cry from the 50 percent clip in the preceding quarter and the 63 percent quarterly gain of not that long ago
A good chunk of that underperformance stemmed from operational problems, something that shows just how much more work Walmart has to do if it is to become a true rival to Amazon.com and live up to the narrative Wall Street has bought into after several quarters of outsized online growth.
Walmart CEO Doug McMillon acknowledged that the company had struggled to manage the enormous flow of products like electronics, toys, and gifts into its e-commerce distribution centers at peak times during the holiday season, the abundance of which hurt its ability to get more everyday items in-stock online. These are things Amazon has largely mastered.
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“Our basic in-stock e-commerce suffered as a result,” McMillon said on a conference call. “We’re learning how to deal with higher volume.” It’s clear Walmart will have to learn more quickly if it is to reach its projections of getting e-commerce growth up to 40 percent this year as it promised investors.
With store expansion largely at a standstill, Walmart needs e-commerce, and its interaction with existing stores, that much more if it is to keep growing. Indeed, Walmart has been using its enormous network of 4,500 plus stores as distribution points for merchandise, but also as a way to get an edge over Amazon in grocery delivery by service as pick-up points. Walmart gets nearly 60 percent of its U.S. sales from food, so this is no small matter. Of course Amazon is not sitting still, as its purchase last year of Whole Foods Market showed.
Walmart’s same-store sales in the U.S. rose 2.6 percent, and traffic rose, helped by its multi-year, multi-billion dollar investments in making stores more appealing with initiatives such as an overhaul of its fresh food areas, improving customer experience by giving workers raises and more training so they care, all while expanding the assortment available on walmart.com.
And Walmart needs to nail all this: the company said it will invest more in customer attraction on its namesake site as it shifts some marketing away from jet.com, whose more affluent and urban shoppers are pricier to win over.
To be fair, Walmart said U.S. e-commerce revenue came in at $11.5 billion for the year, inline with what executives had forecast in October. But the digital business is losing money, and will again this year. And it can’t afford to lost ground too, especially to an Amazon whose online revenue is larger by a factor of six.
Date: Feb 20, 2018