Amazon is now the leading online platform outside of China, as Walmart's online sales start to cool off.
It is no surprise that online sales skyrockets in 2020, as the pandemic pressured retailers of all sizes to ramp up their online presence and practices. Over the course of the year, there were some big winners in the game, namely: Walmart.
Walmart’s online sales increased by 97 percent in the second quarter compared to 2019, ultimately the faster on record for the retailer. Walmart became a serious competitor against the likes of leading retailers like Amazon, which currently represents four percent of total US sales.
In 2021, Walmart responded to the growth spurt of its online channel and began Project Glass. This, essentially, includes the revamp of its online channels, including converting its Dallas store into a fulfilment centre as its online orders continued in an upward trajectory. With 200 extra staff members on-site to help secure online orders as fast as possible, Walmart prepared for ongoing growth in its online platform.
However, these figures from Q2 didn’t last as long as they had hoped. In the US, the world has returned to ‘normal’, with stores re-opening and pandemic restrictions eased according to each state’s requirements, resulting in fewer reasons to shop online. “We definitely saw a traffic shift back into store from e-commerce,” said John Furner, the Head of Walmart’s US Operations.
Walmart’s most recent financial update shows that online growth has tapered dramatically, increasing only six percent in the last three months through July 31. In a two-year stack, the retailer’s online sales increased by 103 percent. This does not mean that Walmart is falling behind, by any means. In fact, the retailer expects its online sales to reach $75 billion by the end of the year.
“We had another strong quarter in every part of our business,” said Doug McMillon, the President and CEO of Walmart. “Our global e-commerce sales are on track to reach $75 billion by the end of the year, further strengthening our position as a leader in omnichannel.”
McMillon further explained the rapid increase in its online grocery sales and utilising its own data and technology to continue this growth. “We grew market share in U.S. grocery, added thousands of new sellers to our marketplace, rapidly grew advertising businesses around the world and we’re finding innovative new ways to commercialise our data and build technology. We have a unique ecosystem of products and services designed to serve customers in broader, deeper ways and we’re grateful to our associates for making it all happen,” he said.
Walmart’s online grocery sales remain strong | via TechCrunch
As mentioned earlier, the reasons to shop online have been reduced as pandemic restrictions are eased across the United States. On the call to investors, McMillpon noted that ‘customer behaviours changed during the quarter, as people were shopping with us more in stores than online’ in comparison to 2020.
This online growth is modest compared to the online giant, Amazon, which has since taken over as the largest online retailer outside of China. JP Morgan has predicted that Amazon’s popularity will overtake Walmart’s by 2022, but the pandemic has expedited this growth faster than expected. Currently, Amazon has a 40 percent stake in the US e-commerce market and has been projected to overtake Walmart as the leading online retailer for some time.
How can Walmart stay on track to remain relevant against this threat? While operating as an omnichannel platform, it needs to prioritise its online channel. “Walmart needs to move its online appeal well beyond its core customers, so that it can access higher levels of spending from younger and more affluent group,” said Neil Saunders the Managing Director of GlobalData.
Walmart as a business is ‘changing shape’, said McMillon. “And I think that’s the key. We’re not just buying and selling merchandise in Supercenters at this point. We’re changing how the company is comprised. If you look at — just imagine a bar charter revenue or a bar charter profitability — the mix is shifting. And that unlock, as we stick with it, creates a different financial equation than what we would have had years ago,” he said.
At the time of writing, Walmarts shares have dropped significantly, shedding 1.6 percent and closing at $149.10 per share.
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