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Happy Holidays! Walmart heads into Black Friday on the back of 79% e-commerce growth (but still chalks up an online loss)

Stuart Lauchlan Profile picture for user slauchlan November 18, 2020
Walmart's e-commerce growth is impressive and its new Plus offering is set to take on Amazon Prime - Happy Holidays ahead?


With Black Friday almost upon us and the US retail sector about to face up to its most challenging test in an already horrifically challenging year, bellweather Walmart is heading into the maelstrom on the back of escalating online traction as e-commerce sales soared 79% in its latest quarter.

That’s reflective both of Walmart’s early investment in digital as well as the COVID-driven boost to online commerce. CEO Doug McMillon believes it’s a permanent shift:

With the outbreak of COVID-19, the retail world clicked to a fast-forward, and our ability to adapt quickly has been crucial. Changes in customer behavior have accelerated the shift to e-commerce and digital. We were well positioned to catch and ride these waves given our previous work and investments. Our e-commerce and omni-channel penetration continue to rise, accelerating trends by two to three years in some cases. We’re convinced that most of the behavior change will persist beyond the pandemic.

Prime contender

In September, Walmart opened up its latest front in the war against Amazon with the launch of its Walmart Plus subscription service Walmart Plus, a presumptive rival to Amazon Prime. It’s too early for any serious assessment of how successful or otherwise this will be, although John Furner, CEO at Walmart US, says:

We're excited about the offer. We think it's an important part of the Walmart ecosystem for customers to be able to experience all of the benefits that Walmart has to offer. We want this to be a very friction-free experience for the customer and whether the customer is shopping in the store with Scan and Go or using our fuel discounts, which are available at our Walmart gas stations, Murphy, Murphy Express and now Sam's Club, and then finally be able to get unlimited delivery on food, consumables and general merchandise from the store. We think it's a really compelling offer that customers will enjoy being a part of and being able to benefit from.

The program is new, so we don't have a lot to share at this point and we're still learning. We're focused on the best experience we can possibly deliver for our customers. And we're looking forward to the impact that the program will have. It might be worth repeating the stat we've shared over the last few years that when a customer shops us in-store and online, they spend about twice as much and they spend more in store. Those are pre-pandemic stats, we’re not updating those at this moment, but it is important to remember once they're engaged in a digital relationship and they're shopping as holistically like that, the value of that customer relationship goes up.

For his part, McMillion sees the new scheme as another digital notch to be marked up in the firm’s ongoing online expansion:

We're putting together an ecosystem, these parts are connected and I do think Walmart Plus can be helpful in a lot of ways over time and the information that we'll have about customers, the ability to personalize, I think we'll be able to serve them better in both sides, the stores and eCommerce will come to life in a way that helps make Walmart Plus even stronger.

Into 2021

Once Black Friday and the Holiday season is past, McMillon is confident that Walmart will go into 2021 in a healthy state, whatever further developments there are in the wider US economy.  With COVID still not under control and the prospect of a change of administration in Washington, there are a lot of potential bumps in the road. But the CEO states:

We're in control of a lot of our own destiny. We know what customers want, and we have capabilities and are adding to those capabilities to be able to serve them. So we're on our front foot. We are thinking about this offensively, and next year, there'll be tailwinds and headwinds that we're up against. Our in stock will be better. Our ability to service customers through e-commerce including pick and delivery from stores will be better. We will have fewer COVID-19 expenses, we hope and pray. So all of those things we'll navigate as we go through the year, but our mindset going in is an offensive mindset.

My take

Important caveat to all this e-enthusiasm from Walmart. The growth rate is impressive, the macro-economic shift to online is genuine, the spadework has been put in by the retailer to build up its digital arsenal, but…Walmart’s e-commerce business is still running at a loss. The firm won’t break out the exact figures, but does talk about “significantly reduced operating losses in e-commerce”.  A reduction is good, but a loss is still a loss. Given the external driver online of COVID, what is it going to take to get the e-business into the black?

For his part, McMillon chooses - probably rightly - to talk up e-commerce as part of the wider omni-channel offering that Walmart can articulate:

We will keep an eye on e-commerce as a business, of course, but also remember we've got all these other levers where it's an omni-channel business. We've got a lot of variables on the store side. So when we think of how we blend the combination of revenue, expenses and profitability together, we think of it in a holistic fashion. It is great to see how stores have been playing a role with fulfilment.

Indeed, that old ‘you’re never far from a Walmart store’ argument still holds true in the US, even in the middle of a pandemic, as he adds:

We do serve about 90% of the population within a 10-mile radius and just in the last quarter we added another 230 stores that can do pick-up. That brings our total to 3,700 stores. Then we've got 2,700 stores that are now offering what we describe as Express Delivery. And we have examples even just this week of customers who are getting their groceries from the time of order to delivery in under half hour. So, we're really excited about the ability to have services like that all across the country in big cities, in small cities and everything in between.


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