Wal-Mart’s e-commerce momentum builds, but room for improvement noted

by The City Wire staff ([email protected]) 321 views 

The expectations for Wal-Mart’s e-commerce business is high coming off of 22% sales growth last year. This accomplishment was deemed “solid but not quite as strong as we wanted,” Wal-Mart Stores CEO Doug McMillon said in pre-recorded earnings call Feb. 19.

Wal-Mart invested 8 cents per share in its e-commerce operations last year, which was above the 5-cent to 7-cent forecast. The e-commerce division also benefitted by a 25% increase in gross merchandise value for the year, which is linked to higher third-party prices in its largest markets of the U.S., Brazil and China.

This year Wal-Mart expects to invest between 6 cents and 9 cents per share on its e-commerce initiatives with predicted sales growth in the mid-20% range.

“We’re striving to balance sales growth and profitability. We’re being thoughtful with our investments, ensuring we have the infrastructure in place to build this business for the long term. I’m excited about the possibilities that are in front of us,” said Neil Ashe, CEO of Walmart Global E-commerce.

The majority of the spending last year and the planned investments for this year relate to building out fulfillment infrastructure and further enhancements to the “Pangea” operating system. Ashe said the investments allow Wal-Mart to get closer to customers with delivery and will also help engage shoppers wherever and whenever they want.

Ashe said the fourth quarter was an important benchmark not just because it is the biggest quarter of the fiscal year, but because the retailer’s investments started to play a bigger role throughout the business. He said Walmart.com posted record sales of Cyber Monday and the following week while logging more than 1.5 billion page views between Thanksgiving and Cyber Monday.

Samsclub.com had strong double-digit comps on Thanksgiving and on Black Friday and in the U.K., company officials said ASDA made Click and Collect easier for customers in stores and added pick up points at petrol stations, tube stations and other locations.

In Brazil, Ashe said Walmart’s e-commerce saw its strongest sales quarter, with high double-digit sales growth in the recent quarter.

Ashe said the investments this year will encompass the areas of global technology platform, next generation fulfillment network, talent, and integrating digital and physical.

“We launched most key elements of our site and mobile shopping experience on the new platform before holiday on walmart.com in the U.S. Despite all of our testing, with the sheer complexity of a complete platform rebuild, there is nothing like the real thing on the busiest day of the year. Pangaea hummed along all day, serving our customers at record volume,” Ashe said in the pre-recorded earnings call.

He said a record number of online orders was the first major test of the retailer’s next-generation fulfillment network. Ashe said that network included the large scale fullfillment center in Texas, which shipped twice as many orders as last year. The network also includes stores and the distribution centers. Wal-Mart has four other large-scale fulfillment centers expected to open later this year.

“While there will be some ramp up time, they will significantly expand our fulfillment capacity and efficiency in the coming years,” Ashe said of the new centers.

Mobile – smartphones, iPads and other handheld devices – is at the heart of Wal-Mart e-commerce operations as continues to an area of big investment and growth, according to the company.

“Nearly 70% of our walmart.com traffic during the holidays was from mobile devices. … In addition to Walmart, we’ve focused on Sam’s digital and physical integration with its club pick up experience, and it paid off, as we saw nearly 30% growth in Club Pickup during holiday,” Ashe said.

He said the Pangaea platform will enable Wal-Mart to double product assortment this year with more than 10 million items.

David Cheesewright, CEO of Walmart International, said integrating e-commerce into the global businesses is also big priority this year.

“This quarter we’ve made even more progress and I’m very excited about the impact we’ve made in online retail. In Japan, we automated the order picking process to fulfill Seiyu.com grocery orders more efficiently and sustainably. We’re testing new offerings, such as “grab ‘n go” lockers in Canada. In India, we’re continuing the rollout of an online offering to business-to-business members and expect to reach all members by the end of next year,” Cheesewright said in the pre-recorded earnings call.

Two of the larger e-commerce markets, China and Brazil are benefiting from the Pangaea platform.

“Yihaodian, our e-commerce business in China, benefited from investments in the supply chain and promotional events. Traffic increased more than 40% and average ticket improved as well,” Cheesewright said.

In Brazil, he said e-commerce sales growth is driven by increased sales for large appliances and wireless devices. He said low-cost smart phones helped drive sales growth of more than double the same period last year.