August 10 - 13, 2020
The Sheraton, Boston
Amazon vs Walmart: The Battle for the eCommerce Crown
With Amazon's stranglehold on the eCommerce market, other online brands are finding it increasingly difficult to compete. But there's an unlikely contender for the eCommerce crown - and it comes in the form of the world's largest company by revenue, and king of the physical retail space: Walmart.
(Image source: Walmart.com)
A Rising Contender
Walmart's latest earnings report shows that the largest bricks-and-mortar retailer in the world is making significant progress, despite Amazon's mammoth presence and massive share of U.S. internet sales. eCommerce sales were up 43% during the fourth quarter of 2018, and Walmart achieved online sales growth of 40% for the year.
Chief Financial Officer Brett Biggs has indicated that Walmart is calling for internet sales to be up 35% in 2019, with growth each quarter of this year falling between 30% and a low 40 percentage.
With Amazon still accounting for roughly 50% of all eCommerce sales in the U.S., Walmart is steadily gaining ground. According to eMarketer, the company overtook Apple in 2018 to become the third-largest online retailer in the country, trailing only Amazon and eBay. And eMarketer predicts that Walmart will end 2019 with about a 4.6% share of the U.S. eCommerce market - up from 4% in 2018.
(Image source: Walmart.com)
According to research by The Motley Fool, Walmart should generate about $16 billion in eCommerce sales in fiscal 2018 (the end of January 2019). That represents an increase of 40% over last year - slightly faster than Amazon's 37% year-on-year growth in sales over the previous 12 months. While Amazon's $221 billion in trailing 12-month sales still greatly exceeds the total of Walmart's online sales, Walmart's eCommerce growth is healthy, by comparison.
Playing To Walmart's Strengths
It seems counterintuitive, but key to Walmart's success in the eCommerce arena is its sheer physical presence on the ground.
Walmart placed a big emphasis on the opening of its brand-new Supercenters over the last couple of decades - a policy which somewhat distracted the company from the emerging trend of eCommerce. However, this seems to have been a blessing in disguise.
That focus on Supercenters has given the brand a huge network of stores which it can exploit to bolster its eCommerce offerings. And this is primarily due to the market where most people shop most often - and one in which Amazon has yet to fully make a mark: Groceries.
The company has a network of almost 2,100 grocery pickup locations and 700 pickup towers, from which customers can collect fresh and frozen food products and household items. Walmart has over 4,761 stores in the U.S., in total. Around 90% of the U.S. population lives within 10 miles of a Walmart store or Sam's Club.
Most Walmart shoppers visit to buy groceries, which made up 56% of the company's unit sales last year. Compare this with the presence of Amazon's Whole Foods Market, which only had 465 stores open at the close of 2017, and it becomes clear why physical coverage and grocery pickup have contributed significantly to Walmart's eCommerce growth.
Building on their enormous success with its grocery pickup service, Walmart management is now using its expertise in this area to implement grocery delivery. By the end of 2019, Walmart expects to cover about 40% of the U.S. population with delivery through some 800 stores.
(Image source: Walmart.com)
Of course, there has to be more to Walmart's eCommerce footprint than just groceries.
Former President and CEO of Walmart U.S., Bill Simon puts it this way: "I think the winning play in grocery will be order online, pick up in store, and I think Walmart is best positioned to do that. Don't underestimate how important the grocery business is for Walmart. To be sure, Walmart still has room to improve its online business. It's still trying to make each shopper's purchase on the internet a more profitable one. To do that, it needs to sell more than groceries, which have low margins."
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Reshaping The Business
Rising to this challenge, Walmart has been restructuring its operations and creating new business relationships, to better position the brand in the eCommerce marketplace. The company has been trimming down the less productive parts of its business, through acts such as selling its Asda business in Britain and closing 63 Sam's Club locations in the U.S. This is enabling the brand to focus on other, more profitable areas of growth.
Walmart U.S. is expanding its grocery delivery and transforming its website into an online mall offering a huge range of brands. And the shuttered Sam's Club venues will be re-purposed as eCommerce distribution centers to accelerate delivery.
Walmart has also been busy with a slew of smart acquisitions, which help position it as a company focused on eCommerce brands. In 2016, the company acquired eCommerce retail platform Jet, and footwear brand Shoebuy. This was followed in 2017 by the acquisition of clothing brands Moosejaw, Modcloth, and Bonobos. In 2018, Eloquii, Bare Necessities, and home accessories retailer Art.com joined the Walmart stable. In all, Walmart has spent $2.8 billion on acquisitions to strengthen its eCommerce operations.
Apparel is another major challenge for online retailers - including Amazon, which has been aggressively moving into almost every vertical in this sector recently. Walmart's own ventures into clothing demonstrate its dedication to keeping the pressure on its eCommerce rival.
Elsewhere, Walmart has been making big moves in both China and India, looking to stimulate international growth. Walmart has purchased a 10% stake in China's JD.com, and recently invested in India's Flipkart.
Incubating New Technology
Through its acquisition of Jet.com, Walmart was finally able to connect with the high income, urban, Millennial shoppers who had previously been hard for the company to reach. Perhaps more importantly, Walmart also gained the services of Jet.com founder and CEO, Marc Lore. The entrepreneur, who has a long track record of starting and successfully growing online businesses like Quidsi (which owned Diapers.com), Soap.com, and Wag.com, now heads Walmart's U.S. eCommerce operations.
Under Lore's stewardship, Walmart established Store No. 8 in 2017. This facility, billed on its home page as "the incubation arm of Walmart," has a mission to develop new technologies and processes to expand Walmart's digital presence and shape its operations, making "big bets on transformative ideas that have the potential to fundamentally change how people shop in the future."
One of its initiatives is Jetblack, a members-only personal shopping service that launched in Manhattan earlier this year. On the Jetblack platform, customers order what they want via text messages, leaving a team of shopping assistants to handle the rest.
Store No. 8 is working on other projects which the incubator isn't disclosing yet. Some are rumored to be standalone ventures, while others will become part of the greater Walmart ecosystem. There are hints and suggestions as to what's on the Store No. 8 agenda. For example, in early 2018, Walmart acquired a virtual reality start-up called Spatialand. And Google alumnus Bart Stein is running another project, which the Store No. 8 website plays up by stating that "Bart and his team have created some of the most thoughtfully designed and technologically advanced home devices on the market, and will bring those past experiences and learnings to Store No. 8."
Walmart has also developed strategic partnerships with technology powerhouses such as Google and Microsoft, which allow it to bring its products to Google Express and sell them through voice search with Google Home and other applications. And the company recently struck a deal with PayPal Holdings to help consumers without bank accounts gain easier access to cash in a more digitized economy.
Using Apps To Enhance The Shopping Experience
In addition to making moves at the strategic and macro levels, Walmart has been taking steps to improve its eCommerce operations for individual consumers on the ground. For example, in 2018, the company released a number of new and improved features to the Walmart app, designed to help customers get in and out of the store more quickly, and to provide help to shoppers before they ever leave the house.
(Image source: Walmart.com)
These new features have been integrated into an umbrella environment for in-store shopping called the Store Assistant. Each time a shopper visits an outlet and opens it, the Walmart app transforms into Store Assistant, and displays a set of tools to make shopping fast and easy, such as Walmart Pay. GUI enhancements to the Walmart app also appear under the Store Assistant umbrella, making the product search bar and scanner easier to find, enabling buyers to quickly read reviews, find items in store, or double-check prices.
Drawing on the fact that 80% of Walmart customers make a list before leaving the house, the Store Assistant adds smart list-building capabilities to the Walmart app. Based on a consumer's previous purchases for example, entering "milk" will pull up a display of their preferred brand, and check to see whether the item is in stock at their local store. Total costs for each cart (plus tax) are calculated as shoppers make their lists, allowing them to see the cost of a basket before even setting foot inside the store. Geo-location plots the exact aisle where listed items are located, and live updates enable customers to cross off or add new items as they go.
With over 4,700 separate retail outlets to cover, in-store navigation for consumers is being further facilitated through the roll-out of Walmart's new Store Maps. This feature - also available via the Walmart app / Store Assistant platform is setting out a detailed layout for every Walmart store - pinpointing specific items down to their particular aisle and shelf.
Finally, a directory of store information accessible through the app enables shoppers to easily check whether a particular Walmart store has a department such as a Photo Center or Auto Care Center - and to see the opening hours and phone numbers for each department.
Looking Beyond The Small Screen
Despite the convenience of shopping via mobile phone, many consumers prefer the greater visibility offered by hardware with a larger form factor and viewing screen, such as a laptop or console. This preference extends to Walmart's own personnel, as noted by Nicole Clendeninn, a senior project manager of merchant technology at Walmart Labs.
"Our electronics department associates noticed that customers were using store display laptops and tablets to purchase from Walmart.com. Just like me, they wanted to use something bigger than a phone screen to shop. Others used the store displays because they didn't have a smart device with them."
(Image source: Walmart.com)
Walmart.com in-store kiosks were the solution to this problem. Launched in just five stores in 2017, the feature spread to over 50 locations by the end of the following year - with more on the way. Each of these sites has one or two kiosks, usually located near customer service, or the electronics department. With the exception of Marketplace items, the kiosks enable consumers to shop for all products on Walmart.com, pay for their purchases using cash or other payment methods, and ship items to a Walmart store or their homes.
Nicole Clendeninn's team used this same technology to enable associates to help customers make online purchases from anywhere in the store. The technicians added a new app to the hand-held device that associates already use for their daily tasks, enabling them to provide on the spot assistance to consumers buying Walmart.com merchandise. The team is working to get the associate-facing app installed on all hand-held devices used by Walmart staffers.
Using the new app, associates can pull up product reviews, check customers out on the spot, or take them to a kiosk where they can pay without a card. If a customer can't find what they're looking for in the store, the associate can help them find it online, display the reviews, and help them check out.
Using Voice To Order
Walmart's collaboration with Alphabet's Google is extending the brand's digital reach in other ways. Starting from April 2019, customers can say, "Hey Google, talk to Walmart"- and the Google Assistant will add items directly to their Walmart Grocery cart. The service, known as Walmart Voice Order, is adaptive like the Walmart app, using customer purchase histories to inform its responses. Its machine learning algorithms promise to make its response more accurate, the more you use it.
So using the dairy goods example again, if a customer says "add milk to my cart," Walmart Voice Order will draw from their past milk purchases to add the specific brand of milk the customer buys regularly - and the specific amount.
Using voice technology, consumers typically like to add items to their cart one at a time over a few days, rather than completing their shopping for the week all at once. This preference aligns with the way that Walmart Voice Order operates. It's a cross-platform facility, enabling customers to use any device that supports Google Assistant. Since the Assistant is now available on over a billion devices - including Smart Displays like Google Home Hub, Android phones, iPhones, and smart watches - Walmart Voice Order has the potential to make the Walmart brand accessible to consumers across the globe.
Adding Offerings For The Future
While Walmart is certainly no lightweight when it comes to retail, the fact that it's made such incredible progress in the eCommerce world (despite being relatively late to the party) demonstrates that the war with Amazon is far from over. If other online brands can follow its lead, they stand a good chance of also surviving and thriving.
Current Walmart President and CEO, Doug McMillon maintains that, "We're making progress in eCommerce. Our focus remains on earning repeat shopper visits and strengthening our assortment of merchandise. Some of Walmart's latest investments have been in improving its website's search functionality, making it easier for customers to find things, managing product reviews, and speeding up delivery."
Strengthening that assortment of merchandise has led Walmart to make moves on several fronts. The company recently launched its own home furnishings line called MoDRN, and Walmart rolled out a number of revamped, in-house apparel brands last year. The Bentonville, Arkansas retail giant recently teamed up with celebrities like Sofia Vergara and Ellen Degeneres, to launch clothing lines exclusive to Walmart.
For Doug McMillon, the pace of Walmart's eCommerce transformation has been slow. "The thing that's taking longer than what I would have guessed is to build that merchandise assortment on Walmart.com. The company is trying to get to a repeatable, healthy mix of business online. We're pedaling fast, trying to make that happen, and disappointed it's taken so long."
Others might disagree. Walmart's eCommerce sales were up 43% during the fourth quarter of 2018, and it achieved online sales growth of 40% for all of 2018, demonstrating that its strategy is working well so far. And the company is giving its competitors a very good run for their money.
"Long term, [Walmart] is using its size to go head-to-head against Amazon," Liz Dunn, founder and CEO of Pro4ma, a forecasting tool for retailers, says. "And it's working."
For more insights, join us at eTail Boston, happening this August 19 -22 at the Sheraton Boston! eTail is four days of action-packed stories, conversations, and connections with the top minds at America's most successful retailers. Download the agenda here for full details.