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Walmart’s online shopping strategy is starting to pay off

First Published      Last Updated May 18 2017 12:03 pm

Walmart has recently put its foot on the gas in its bid to catch up to Amazon.com in the e-commerce world, most notably by acquiring a collection of smaller shopping sites and rolling out splashy offers such as free two-day shipping on many purchases.

Now there are signs that it is paying off: Walmart on Thursday reported a robust 63 percent surge in online sales in the most recent quarter. Importantly, the company said that the majority of the increase came from sales growth at Walmart.com, suggesting fresh momentum at its flagship digital business.

"The acquisitions have received a lot of attention, but our plan in e-commerce is not to buy our way to success," said Doug McMillion, Walmart's chief executive, in remarks to investors.




To be sure, online shopping still comprises only a tiny slice of Walmart's business, and it remains to be seen whether this strong growth is sustainable. But it is an encouraging sign for a company that has spent billions of dollars to trying to step up its game in this arena.

Marc Lore, the head of the retailer's online business, said that a key driver of the growth was its move to offer free two-day shipping on millions of items without a membership fee. That model was meant to offer Amazon Prime-like speed without having to pay a membership fee. Walmart said it also helped that it has expanded its assortment online to 50 million items, a five-fold increase from this time last year. (Jeffrey P. Bezos, the chief executive of Amazon, owns The Washington Post.)

The company has been trying several new tactics to lure more online shoppers, including offering a discount on certain e-commerce purchases if shoppers pick them at a store instead of having them delivered to their homes.

Meanwhile, Walmart's broader U.S. business looked healthy in the quarter. The company reported an increase of 1.4 percent in comparable sales, a measure of its sales online and at stores open more than a year. That marked its eleventh consecutive quarter of growth on this measure.

That consistent run of growth stands in contrast to what has been seen lately in the wider retail industry. Target recently reported its fourth consecutive quarter of declining comparable sales. Department stores such as Macy's, J.C. Penney and Kohl's saw their sales slide in the latest quarter. Things are looking grim at several specialty apparel retailers: Ralph Lauren said Thursday that it recorded a 16 percent plunge in quarterly sales. Ascena Retail Group, the parent company of Ann Taylor, Loft and other clothing chains, saw its stock nosedive some 38 percent on Thursday after it lowered its forecasts for the year, citing "unprecedented secular change" in its category of retailing.

"Given the current retail landscape, with many retailers experiencing challenges across multiple categories, we believe Walmart will continue to turn up the competitive heat by utilizing its scale and technological advantages to extract increased market share," said Charlie O'Shea, a retail analyst at Moody's, in a research note.

 

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