Walmart might have disappointed analysts with a fourth-quarter sales slowdown, but its online business is powering ahead amid a concerted counterattack on Amazon.

The US retail titan increased like-for-likes 1.9% in its domestic market during the three months to January 31, down from 4.2% a year ago. Online sales, by comparison, surged 30% in the quarter and were up 37% across the 12-month period.

Walmart amazon

Walmart has been unafraid to play Amazon at its own game

During a presentation to analysts last week, Walmart chief financial officer Brett Biggs underscored just how big a beast its ecommerce division has become.

“This year, we estimate global ecommerce sales will approach $50bn and that’s doubling [in] just over two years,” Biggs said. “$50bn in revenue would put this well within the Fortune 100, even just on its own.”

It is a remarkable feat for a business that was, by its own admission, slow to the ecommerce party, allowing Amazon to steal a march online through its compelling combination of rapid fulfilment and extensive choice.

Walmart has been bold in its approach to closing the gap. At a time when plenty of retailers are focusing on exploring ‘what Amazon can’t do’, Walmart chief executive Doug McMillon and co are, to an extent, playing Amazon at its own game.

The retailer is ploughing time and cash into enhancing its fulfilment capabilities. Three years ago, the average Walmart.com package took five days to arrive at a customer’s home. Today, it is just two days – and its same-day delivery proposition can now reach 75% of the US.

Toe to toe 

Walmart has broadened its focus to becoming a good partner as well as a good retailer, opening the doors to more third-party brands. Over the past three years, it has added 7,500 new brands to its online marketplace – partnerships that have helped the Walmart.com SKU-count swell to around 80 million products.

The goliath has acquired businesses such as Jet.com and Bonobos. It even went toe to toe with Amazon in a race to buy Indian ecommerce operator Flipkart – and won.

Winning the war is an altogether different proposition. Walmart may have leapfrogged Apple to become the third-biggest ecommerce player in the US, but its market share is dwarfed by Amazon’s near-40% slice of the pie.

Yet its ascent to third place in the US online market – where it now nips at the heels of eBay – and its growth into a near-$50bn business is a testament to the journey it has been on under McMillon and ecommerce boss, Jet.com founder Marc Lore.

“Walmart has not allowed mistakes to dampen its appetite for online and technological innovation”

Admittedly, Walmart has a degree of breathing space that others cannot be afforded. Its online business remains in the red as it grows and improves its capabilities, but its performance in grocery and international markets have more than cushioned that blow.

The retailer raked in an operating profit of $20.6bn in the 53 weeks to January 31, while capex was a whopping $10.7bn – sums that many retailers can only dream of.

But there are lessons to be learned from Walmart’s approach, even if the reality is that they would need to be implemented on a smaller scale and on a much smaller budget elsewhere.

Rather than look at its sprawling store estate as a burden, Walmart has leveraged its bricks and mortar presence to enhance its digital proposition.

Walmart customers can order online for kerbside collection from more than 3,200 locations across America and it fulfils home deliveries from some 1,600 shops.

Although take-up of the latter has been slow in the US compared to the UK, combining the best of physical and digital has established synergies, added an increased relevance to stores and turbo-charged Walmart’s ultimate ambition to become “the world’s greatest omnichannel platform”.

No fear

For such a mammoth company, Walmart has put many smaller business to shame with its agility. It is testing, learning, failing fast and moving on, with no fear of admitting defeat.

After buying Jet.com, it quickly established that it did not want to run it as a separate business, instead opting to integrate its technology and expertise into the existing Walmart ecommerce division.

Despite much fanfare surrounding its 2018 launch, Walmart also closed its Jet Black personal shopping service earlier this month. It will instead apply learnings, such as how customers respond to ordering by text message, to its core Walmart.com business.

Crucially, Walmart has not allowed such mistakes to dampen its appetite for online and technological innovation.

Walmart website

Lessons from Jet Black will be applied to Walmart.com

Just last week, Lore told investors: “We’re exploring opportunities around conversational commerce, augmented reality, virtual reality, delivery into the refrigerator and incubating digitally native brands.”

In-home deliveries are being tested in Kansas City, Pittsburgh and Vero Beach, offering customers unparalleled convenience – drivers can pack deliveries away into the shopper’s home, without them even needing to be there.

Lore says Walmart is exploring what it calls “v-commerce” – using virtual reality to allow customers to “experience” products before they make a purchase. It is working with a start-up called Insperience in a bid to “transform the shopping experience”.

“We’ve got to keep getting better at ecommerce”, McMillon said. “We’re now in a position to play offence to win an omnichannel game.”

Other retailers may not boast pockets quite as deep, but working with the speed and agility Walmart has displayed costs nothing. Adopting such a mindset could prove the difference between multichannel success and failure.

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