Walmart delivers e-commerce cheer as Indian market push begins

After a week of retail mixed fortunes, Wall Street seized on an impressive set of numbers from Walmart, boosted by evidence that its e-commerce investments are paying off, just in time to close its Flipkart deal in India.

For the second quarter, Walmart US turned in comparable sales growth of 4.5%, the strongest performance in a decade. But it was the online growth rate of 40% that caught the eye, up from 33% in the previous quarter and the 23% turned in for the final quarter of last year.

For CEO Doug McMillon, it’s evidence that the transition to an omni-channel retail model is paying off, with further expansion of what’s available to buy online:

We’ve added 1,100 new brands to Walmart.com year-to-date, including Zwilling J. A. Henckels cutlery and cookware, Therm-a-Rest outdoor products, O’Neill surf and water apparel, Shimano cycling products and the brands available on the dedicated Lord & Taylor shop, like Steve Madden footwear. This is a key area of focus for the team because we know that customers value an expanded assortment of these popular brands. We have more work to do on our e-commerce assortment to get to the margin levels we desire and we’re in discussions to bring more key brands to our site.

Meanwhile online grocery pick up is now on offer at 1,800 outlets, while the ambition to offer delivery to a large tranche of the US population by the end of this year looks to be on track with same day delivery a goal:

Jet announced plans to open a fresh fulfillment center that will offer a same-day grocery delivery to customers in New York City. We also continue to innovate and incubate technologies that will shape commerce tomorrow. We announced JetBlack, a subscription service that allows customers in New York City to simply text what they need and have it delivered the same day.

He adds:

We’re serving more grocery pickup and delivery customers and now have more than 1,800 locations with grocery pickup. We’re also making good progress on activating grocery delivery to cover 40% of the US population by year-end. Grocery pickup wait times continue to come down and our grocery delivery times are improving.

It’s all about “moving with more speed”, according to McMillon, who reiterates the four objectives for Walmart:

• Make shopping easier for busy families.
• Change the way Walmart works with a focus on a digital mindset.
• Operate with discipline.
• Be the most trusted retailer in the US.

Indian summer

While still on a high from Wall Street’s reaction to the latest numbers, Walmart announced over the weekend that it has completed its $16 billion investment in Indian e-commerce giant Flipkart, becoming the majority owner with a 77% share. The remainder of the business is held by Tencent, Tiger Global, Microsoft and Flipkart co-founder Binny Bansal, who says:

By combining Walmart's omni-channel retail expertise, supply-chain knowledge and financial strength with Flipkart's talent, technology, and local insights, we are confident that together we can drive the next wave of retail in India.

Moving forward, Flipkart will operate as part of Walmart International, reporting to its CEO Judith McKenna, who says:

Walmart and Flipkart will achieve more together than each of us could accomplish separately to contribute to the economic growth of India, creating a strong local business powered by Walmart. Our investment will benefit India by providing quality, affordable goods for customers while creating new skilled jobs and opportunities for suppliers.

Looking ahead back in the domestic US market, McMillion makes it clear that investment in tech innovation is a corporate priority:

We’re also expanding our omni-channel capabilities and innovating to save customers time. We’re leaning into automated pickup towers for general merchandise. Two years ago, we had no pickup towers and by the end of this year, we’ll have more than 700... We’re continuing to innovate with trials of self-driving cars in Arizona for our grocery pickup customers and automated picking capabilities for grocery pickup in our store in Salem, New Hampshire. Overall, our omni-channel initiatives are contributing to comp sales growth and providing customers with new levels of shopping convenience.

The firm is also trialling virtual reality capabilities, most notably acquiring specialist firm Spatialand to become part of Walmart’s startup incubator, Store No. 8. This is seen as an important area of experimentation with the chain having already filed for patents for a "virtual showroom" and fulfillment system to connect shoppers to a three-dimensional representation of a Walmart store. The idea would be that shoppers could wander digital aisles and 'pick' items off of virtual shelves,  which would then be physically picked and shipped from an automated distribution center.

It’s ambitious thinking and probably not necessarily deliverable en masse in the short term, but McMillon says these are important developments for which there are early signs of success:

We continue to make good progress on executing the fundamentals, while also launching new initiatives aimed at elevating the e-commerce experience. On Walmart.com, we launched new features to the Home category shopping experience this past quarter, including a 3-dimensional virtual tour and the ability for customers to quickly “buy the room” based on their preferences. Last month at Outdoor Retailer, the largest US trade show for the outdoor industry...Spatialand, partnered with Moosejaw to showcase a virtual reality camping experience to give brands a glimpse at how we might create deeper engagement with customers in the future.

My take

The mainstream media has by and large seized on the party line of ‘fighting off Amazon’, which is inevitable in the current retail climate. Reality check though - according to data from e-Marketer, Amazon controls 49.1% of US e-commerce. Walmart jhas 3.7%. It’s hard to imagine Jeff Bezos losing much sleep just yet.

That said, Walmart has to be credited for putting a solid digital transformation program in place to sit alongside its competitively advantageous national infrastructure of bricks-and-mortar stores. This is shaping up to be genuine omni-channel execution, albeit still with a way to go. It’s also worth noting that Walmart has now turned in four consecutive years of growth in the US, which is more than any of its traditional competitors can say.