Walmart halts online slowdown amid big changes for digital future

Profile picture for user slauchlan By Stuart Lauchlan August 18, 2016
Summary:
Walmart's in an exciting place when it comes to its omni-channel digital strategy, a stark contrast to the likes of Target.


walmart

The distinctions that we talk about today between stores, apps, pick-up, delivery and sites are continuing to blur into the background for customers. For them, it’s just Walmart.

After nine quarter of slowing online growth, that must come as something of a relief to Walmart CEO Doug McMillon.

The firm just turned in quarterly numbers that showed some healthy online growth year-on-year. E-commerce sales were up 11.8% while Gross Merchandise Value - the actual sale price charged from the customer multiplied by the number of items sold - was up 13%. McMillon says:

This was primarily due to growth in our marketplace offering in the US, the continued roll out of online grocery and growth of pick-up in stores and clubs. We continue to see proof that our customers enjoy a seamless shopping experience.

Things are about to change on the e-commerce front though, following Walmart’s planned acquisition of jet.com. Current e-commerce boss Neil Ashe is on his way out and will be replaced by jet.com CEO Marc Lore as President and Chief Executive of e-commerce. McMillon confirms the changes:

Once the acquisition is complete, we look forward to welcoming Marc Lore, current President and CEO of Jet.com. He will join Wal-Mart as our new President and CEO of e-commerce, reporting to me. He will be responsible for both the Walmart and Jet brands in the US. Marc is a passionate merchant and innovative thinker who will definitely add value to our business. I look forward to working with him.

Ashe will be in situ until the end of the fiscal year, he adds:

We've built a solid foundation in e-commerce under the leadership of Neil Ashe. During Neil’s tenure, we more than doubled our e-commerce GMV, became the second most trafficked e-commerce site in the US, re-platformed Walmart.com, opened a national fulfillment center network and most importantly, became known as a great place to work for talented technologists and e-commerce professionals in Silicon Valley.

All of that good work led to the decision to acquire jet.com, possibly a somewhat development if it’s led to Ashe’s departure. But the jet.com deal is the next logical step, argues McMillon.

Operating Walmart.com and Jet.com will allow us to reach even more customers and drive a higher level of growth more quickly. One of the things we like about the technology they've developed is that it rewards customers in real time with savings on a basket of goods and puts them more in charge of the price they pay. This empowers customers in a way that is true to the spirit of Walmart.

When customers build a basket of goods online rather than ordering one item at a time, shipping economics are in their favor and ours. Wal-Mart's advantage has always been in providing the lowest prices on a basket, and Jet has created a unique way to deliver the lowest cost basket online.

Meanwhile...

Not that the end customer is likely to notice much difference just yet. McMillon cautions:

It’s important to remember that customers won’t see changes immediately as we await government approval, and the necessary tech platform changes, which will take time.

In the meantime, there are other digital aspects to focus on, not the least of which is the roll0out of Walmart Pay across all US stores, which McMillon says is receiving positive feedback from end users:

Customers tell us they love the convenience of this unique service, and we've found that a majority of transactions come from repeat users.

The firm’s also drilling down on its online grocery business and in particular, the click-and-collect service that’s being rolled out:

We added grocery pickup to 30 more markets this quarter bringing our total to more than 60 markets and nearly 400 locations. It's gratifying to see how much this service helps our customers save time.

Outside of the US, the firm’s priority market is China, a location that will be targeted more aggressively through an alliance with indigenous e-commerce provider JD.com. Wal-Mart plans to sell its Yihaodian website to JD.com, instead of continuing to try to enter the market by itself. McMillon says:

In China, in addition to expanding our reach through the strategic alliance with JD.com, we continue to grow our base of stores and clubs. In fact, we continue to gain market share in the hypermarket channel. China remains a strategic focus for us as it represents the largest retail growth opportunity globally.

JD's significant presence online, where Wal-Mart and Sam's Club will feature prominently, affords us the opportunity to extend the reach of our brands to millions of new customers. I made a couple of visits to JD's delivery and pickup points in Shanghai when I was last in China and am excited about the potential it creates for our customers there. Richard Liu, CEO of JD.com, is a talented e-commerce merchant and we look forward to our collaborations going forward.

My take

Compare and contrast with Target earlier this week and it seems that Walmart is doing something right here. The jet.com purchase and the JD.com tie-up are two strategic moves that bode well for the future. The only real downbeat market was the UK, where the firm’s ASDA grocery arm is under pressure from the discount rivals Aldi and Lidl. But with 15 million items now in the Walmart online marketplace and registration open for Walmart’s ShippingPass offering, its $49 a year Amazon Prime competitor, these are exciting times for the firm’s digital plans.