Is Walmart at an online crossroads?
Despite wide external praise for accelerating online growth, Walmart is frustrated internally by the steep losses it has incurred by online operations and its struggles trying to catch up to Amazon.com.
According to a report that came from multiple sources:
- Walmart’s U.S. e-commerce division is expected to lose more than $1 billion this year on revenue of between $21 billion and $22 billion. The losses run counter to Walmart’s longstanding commitment to profitable ventures.
- All three of Walmart’s digital-native apparel companies, Bonobos, ModCloth and Eloquii, are unprofitable, and ModCloth is expected to be sold this year in a cost-cutting move. Walmart is putting purchases of additional digital-native brands on hold for at least the next year unless a can’t-miss opportunity arrives.
- Greg Foran, president and CEO, Walmart U.S., is pushing for more practical investments, such as reducing prices, over digital initiatives that may not scale. He also believes Marc Lore, who leads Walmart’s online operations, is getting too much credit for growing online grocery when the business relies heavily on curbside pickup.
The inner turbulence was signaled by Walmart’s move in mid-June to fold Jet.com’s team into its corporate web organization.
Walmart continues to invest online, including its May announcement to offer free, next-day shipping on a curated selection of up to 220,000 items with no membership fee.
But Mr. Lore is under pressure to reduce losses, and the investments necessary to compete on par with Amazon are being questioned by some inside Walmart. According to eMarketer, Amazon has 38 percent online share versus 4.7 percent for Walmart.
Amazon has 110 fulfillment centers in the U.S. versus fewer than 20 for Walmart. It also has access to many more brands and its Prime membership fees help offset costs.
Some executives believe Walmart should largely be focusing on building a larger online grocery business than Amazon as others worry about the impact of scaled-down ambitions on Wall Street and employee morale.
The report came largely as a surprise as Walmart’s first quarter online sales jumped 37 percent on top of 2018’s gain of 40 percent, again boosted by online grocery.
- Inside the conflict at Walmart that’s threatening its high-stakes race with Amazon – Recode
- Walmart Looks To Sell ModCloth, Will Keep Bonobos – Pymnts
- Walmart said to lose over $1B, weighs selling off money-losing online units – Yahoo Finance
- Walmart’s e-commerce biz is reportedly racking up $1 billion in losses and that’s only one problem it has – CNBC
- Jet.com falls by wayside as Walmart focuses on its website, online grocery – Reuters
- Walmart posts best US comps in 9 years – Retail Dive
- What is Jet.com’s future after its reorg within Walmart? – RetailWire
DISCUSSION QUESTIONS: Should Walmart scale back its ambitions for its e-commerce business? What are some realistic goals to guide Walmart’s online strategy in the years ahead?