Walmart Reports 63% Rise in Online Sales: Amazon In Crosshairs

The important question is whether this is a one time, come-from-behind bump - or whether the growth can be sustained against an experienced and ferocious competitor.

If the answer is yes, it has major implications for Walmart - for Amazon - and for all the other retailers struggling to survive. JL

Rachel Abrams reports in the New York Times:

The question is whether the company can sustain that growth to become a fiercer competitor to Amazon.Walmart is coming from behind online. "It has underperformed, so what we’re seeing is really a catch-up in order to compete with Amazon." Walmart is also trying to improve its physical stores. The results indicated those changes were helping. While profit fell 1.3% for the quarter, the uptick in comparable-store sales bucked the troubles many other large retailers signaled

Walmart has always excelled at selling products in its cavernous stores. It appears to be getting its head around selling online, too.

On Thursday, the company said e-commerce sales had grown 63 percent in the United States in the latest quarter. The unexpected leap offered the strongest evidence yet that Walmart, the country’s largest retailer, is making headway in its effort to be as prominent online as it is across the American landscape.

“This is extraordinary growth, and we’re pleased with the traction we’re generating across our e-commerce offerings,” said Brett Biggs, Walmart’s executive vice president and chief financial officer.

Now the question is whether the company can sustain that growth to become a fiercer competitor to the online juggernaut Amazon. Walmart has invested heavily into building its online business over the years, but the results have been mixed — and Amazon has surged.

Walmart’s latest strategy, put in place by its current chief executive, Doug McMillon, has several parts: expand the number of products available online, better leverage its huge physical warehouses and distribution centers to reach customers quickly across the country, and aggressively pursue deals for online stores.

The biggest of those deals, in which Walmart paid $3.3 billion for the bulk e-commerce retailer Jet.com last year, was part of the plan to offer customers more products through the web.

The earnings results on Thursday gave only hints of about how much the acquisitions gave the company a one-time bump in sales, rather than long-lasting fruit from other changes the company has made. Overall sales rose 1.4 percent, to $117.5 billion, in the latest quarter compared with a year ago.

Walmart executives said that the “majority” of the company’s online growth was organic — meaning not from the companies it had bought — but did not break out specific numbers. And while they were hesitant to declare that such growth was the new normal, they credited an expanded online assortment for helping to lure more repeat customers willing to open their wallets a little wider.

Walmart said it now offers 50 million items through its website, up from 35 million in the last quarter and 10 million from the same time last year.

Comparable-store sales, one measure of growth that looks at stores that have been open for at least a year, rose 1.4 percent. That number includes Walmart’s core online business, but not items sold through Jet.com.

Walmart completed its purchase of Jet in September. Smaller digital acquisitions followed, including ModCloth, a women’s clothing retailer, and the outdoor apparel site Moosejaw.

The deal for Jet was also widely seen as a play for its founder, Marc Lore, a serial digital entrepreneur who could help fix Walmart’s online strategy. Mr. Lore was put in charge of running Walmart.com after the acquisition, spearheading the face-off between the world’s largest brick-and-mortar retailer and its biggest online competitor.

There is no doubt, though, that the company still has a ways to go before coming close to Amazon in e-commerce. Activity on Amazon, which recorded about $136 billion in annual sales last year, accounts for more than half of all online shopping in the United States.

Walmart provides a growth figure only for its online business, and does not specify revenue.

“I think it’s fair to say that Walmart is coming from behind online,” said Neil Saunders, the managing director of the research firm GlobalData Retail. “It has underperformed in that area, so what we’re seeing now is really a catch-up to where it needs to be in order to more seriously compete with the likes of Amazon.”

But Walmart is also trying to improve its physical stores, and the results on Thursday indicated that those changes were helping. While profit fell 1.3 percent for the quarter, the uptick in comparable-store sales bucked the troubles many other large retailers have signaled recently. Target, for example, on Wednesday reported a small drop in same-store sales in its most recent quarter compared with the year before.Bruised by complaints of empty shelves and poor customer service, Walmart pledged to invest in training its in-store associates and revamping its grocery business with services like allowing customers to buy items online and pick them up in a store.

It has also cut back on labor costs, relying more on automation. Customers at many stores can now make purchases through self-checkouts.

The company has begun testing drones to handle inventory at its labyrinthine warehouses. In March, the company received a patent for a process in which drones would transport products between departments in stores.

Shares of Walmart stock rose about 3 percent to close at $77.54.