Wal-Mart playing to win e-commerce battle

by The City Wire staff ([email protected]) 96 views 

Few retailers have brand permission to sell everything to everyone, according to Wal-Mart’s Neil Ashe, who expects to win the e-commerce showdown with the help of brick and mortar.

Ashe, CEO of Walmart Global eCommerce, spoke to investors Tuesday morning (May 1) at the Barclays 2013 Retail and Consumer Discretionary Conference in New York.

Wal-Mart recently said it’s on track to surpass $9 billion in online sales this year, which is part of the retailer’s $466.1 billion in annual revenue. Chief rival Amazon had $61 billion in sales last year.

Ashe said Wal-Mart will win online sales market share with the help of its massive brick and mortar presence. He said 45 million U.S. customers shop Walmart.com each month and roughly half of the 140 million weekly in-store shoppers have smart phones. Integrating mobile with brick and mortar and linking it to e-commerce is paramount in helping the retailer reach its audacious goals.

It’s just been two years since Wal-Mart revamped its e-commerce division that is now helping propel the retailer’s rapid online growth on a world stage.

Ashe said Wal-Mart is a technology company, having made significant investments in talent over the past two years. His team of 2,500 are busy crafting the retailer’s technology platforms in-house. This work, Ashe said, will propel Wal-Mart over the next wave of retail growth in the immediate future.

Today, Ashe unveiled a new homepage for Walmart.com with a trending section where consumers can browse. He told the group the site is constantly being tweaked to provide online customers with the service, products and prices they demand.

Last month Kelly Thompson, a Wal-Mart merchandising executive, said Walmart.com added more than two million items to its virtual store in 2012. Ashe said the retailer will double that inventory addition this year as it works to give customers a broader assortment of items they want at low competitive prices.

“We do closely monitor online pricing, much more carefully today than just a year ago. We recognize that we are an online player competing with other online merchants so we monitor price gaps with competitors by product each day,” Ashe said.

Analysts agree that Wal-Mart’s 4,004 brick and mortar stores located within 5 miles of two-thirds of the U.S. population have to be leveraged if Wal-Mart is going to effectively win e-commerce market share. Ashe said that is why the company recently opted to give in-store revenue credit when an online order is picked-up at one of its brick and mortar locations. The site-to-store option is quite popular with online customers.  

He said almost half of all online orders are shipped to the store for customer pick-up. This option is popular for numerous reasons such as the ability to pay with cash and avoid shipping costs.

Wal-Mart stores contain a sales force of some 1.2 million people who can help folks like Mr. Richardson of Maine get the gift he wanted for his grandson’s birthday when he didn’t find it in his local store. Ashe said Richardson called him last week at 7:30 a.m. to say a store employee recommended that he order his grandson’s gift from Walmart.com, which he picked up two days at the local store.

In a world where speed rules the hearts and minds of impatient consumers next day and same-day delivery are the next hurdles online retailers will have to clear.

Amazon has already set the bar high with its Prime service – unlimited two-day delivery for $79 a year. The jury is still out on how profitable or unprofitable this program is.

Travis Hoium, contributor to Motley Fool, notes: “Prime service has drawn in customers and added to the Amazon’s sales, but it has failed to lead to a long-term profit for the company.”

He said a deeper look into the numbers shows the actual gross margin has fallen from 7% a year ago to 6.8% last quarter.

Amazon is seen as the “one to beat” in online retail, and Wal-Mart’s recent decision to use storage lockers in some markets for online customers was viewed by some as following Amazon’s lead.

Other analysts like Carol Spieckerman, CEO of New Market Builders, said Wal-Mart is very much in control of its own destiny. She has said through e-commerce Wal-Mart can win market share in areas like Manhattan, where they cannot penetrate with brick and mortar. She and other analysts like Robin Sherk, of Kantar Retail believe that Wal-mart’s ability to leverage its physical presence with its e-commerce efforts holds tremendous potential for revenue growth.

Spieckerman said there is no other retailer who is leveraging its vast real estate holdings across the planet to drive more online sales better than Wal-Mart.

Ashe said the e-commerce shopper for Wal-Mart spends more and shops more often than the traditional core customer. With the huge response in site-to-store he said Walmart.com customers are now in stores and spending more.

When asked about future capital investment into e-commerce, Ashe said it will never be as much as the cash outlay for brick and mortar, which is a Lego system, adding blocks to help drive higher revenue.

Ashe explained that e-commerce benefits as every new brick and mortar store opens as it gives the online retail segment another fulfillment center and expanded opportunities for cross shopping between mobile, online and in-store.