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Walmart Delivers E-Commerce Stunner

By David Jones
May 19, 2017 11:36 AM PT
walmart-ecommerce

Walmart on Thursday reported soaring e-commerce growth during its fiscal first quarter, along with strong organic sales figures -- results that suggest rival Amazon may have a fight on its hands.

Online sales grew a stunning 63 percent during the quarter, perhaps in response to the company's newly introduced free two-day shipping and its upgraded mobile app.

"Inside the company, we can see that we're moving faster to combine our digital and physical assets to make shopping more enjoyable and faster for customers, but we also see plenty of room to improve," CEO Doug McMillon said during the company's quarterly conference call. "We need to scale our e-commerce business further and see some additional strength in our store comps to deliver the results we know we're capable of -- so that's what we're focused on."

Earnings rose to US$1.00 per share during the quarter, a 2 percent increase compared with year-ago earnings. Total revenue rose 1.4 percent to $117.5 billion, while on a constant currency basis revenue rose 2.5 percent to $118.8 billion.

Net sales in the U.S. rose 2.9 percent to $75.4 billion from $73.3 billion a year ago.

Walmart issued fiscal second-quarter guidance of $1.00 to $1.08 a share, excluding a 5 cents a share benefit from the sale of Suburbia, a Mexican apparel outlet.

Same store sales for the 13 weeks ended July 28 are expected to increase 1.5-2 percent for Walmart U.S. and 1-1.5 percent for Sam's Club.

Walmart shares rose 3.2 percent to close at $77.54 a share on Thursday, the highest in two years. The stock hit a new high of $79.44 mid-day Friday.

Customer Focus

Walmart's recent focus has been on improving the customer experience.

"I think it comes down to Walmart's leadership," said Paula Rosenblum, managing partner at RSR Research

The 63 percent surge in online sails is a "staggering" figure, she told the E-Commerce Times.

"I think McMillon has helped them put their focus on the customer and off of expense management," Rosenblum said.

Walmart has an advantage over rival big box stores, in that Amazon is playing the same arena that Walmart played in, and the two retailers are directly competitive, noted Rob Gonzales vice president of business development at Salsify.

"When retailers have to close stores, it's because they haven't been able to create differentiated experiences," he told the E-Commerce Times.

Amazon is a very powerful rival, however. Amazon Prime membership has doubled in two years to 80 million members, and they spend $1,300 per year, on average, while non-Prime customers spend an average of $700 per year, based on data from Consumer Intelligence Research Partners.

In-Store Blend

Walmart made several big moves to challenge Amazon's domination of the free shipping business it attracts through booming Prime membership. It also took steps to improve the in-store experience for customers who prefer to shop at Walmart's brick-and-mortar locations.

The company earlier this year announced plans to offer free two-day shipping on more than 2 million items in its inventory. It also lowered the minimum purchase total for free shipping to customers' homes from $50 to $35.

Walmart also enhanced several features in its mobile app to speed up the process of using its in-store pharmacies and money services desks. The updates meant customers using the app could use express lines for both departments. They also could check pharmacy prices and order refills electronically. Further, the updates allow prefilling of money transfers and other financial services.

The company last month moved to save "last mile" delivery costs by using its physical stores as fulfillment centers, offering discounts to customers on certain online-only items if they opted to pick them up at a store.

The discounts initially applied to about 10,000 items that normally are purchased online. However, it's expected that more than 1 million items will be eligible for the discounts by next month.

Walmart is making strides with its online grocery business, which it operated in 670 locations at the end of the quarter, McMillon noted. The company plans to scale that segment to additional stores both in the U.S. and overseas.

Walmart also made several acquisitions, including Modcloth and Moosejaw, and it reportedly is in advanced talks to buy men's retailer Bonobos for $300 million. These all follow the company's $3.3 billion acquisition of Jet.com last year. However, Walmart said it plans to grow its e-commerce business organically.

Overall, its online inventory is huge compared with year ago figures, McMillon said. More than 50 million items, including Walmart-only selections and those form third-party vendors, now are available for purchase from the site.


David Jones is a freelance writer based in Essex County, New Jersey. He has written for Reuters, Bloomberg, Crain's New York Business and The New York Times.


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