Wal-Mart focuses on U.S. e-commerce growth as Amazon expands globally

Two top Wal-Mart execs recently said the retail giant’s first priority is to grow U.S. e-commerce sales and perfect the “seamless” shopping experience for consumers who shop using various methods.

Walmart U.S. E-commerce CEO Marc Lore said the U.S. holds much opportunity for growth and his mandate is to win U.S. online market share. He said the recent acquisitions of online speciality retailers were part of that strategy. When asked about Wal-Mart’s global e-commerce business plans, he said that’s not his priority.

Internationally, the e-commerce businesses report to their in-country president and Lore said the opportunity in the U.S. is too big to ignore. Last year total e-commerce sales in the U.S. were $394.9 billion, up 15.1% from the prior year, according to the U.S. Census Bureau.

Slice Intelligence said in February that 43% of all online retail sales in the U.S. last year went through Amazon. The online retailer also accounted for 53% of the market’s overall growth last year. In 2015, Amazon had 33% of all online sales. However, a majority of those sales are through third-party marketplaces. Amazon’s direct share is about 15%, according to the U.S. Department of Commerce.

According to recent data from eMarketer, Wal-Mart is the second largest U.S. online retailer, with roughly $15 billion in sales in the last year, but is a distant second with about 3.8% of the online market share.

The global e-commerce market is expected to grow to $2.3 trillion this year. Asia Pacific is the largest market. The bulk of retail e-commerce will come from China, where sales were about $899 billion last year, representing almost half (47.0%) of all such sales worldwide, according to data provider eMarketer. North America is considered the second largest market with retail e-commerce sales of $423.34 billion last year, most of which was in the U.S.

LIMITED GLOBAL MOVES BY WAL-MART
Wal-Mart Stores CEO Doug McMillon recently told the Harvard Business Review (HBR) that the U.S. still represents a growth opportunity, which is why the retailer does not talk as much as it global operations. He did say the retailer looks for growth internationally over time.

“China is in a league of it’s own. India is important to figure out. Sub-Saharan Africa is exciting to us,” McMillon said in the HBR interview.

Last month Wal-Mart increased its ownership stake in China-based JD.com to 12.1%, up from 10.8%. The market value of Wal-Mart’s JD.Com stake is roughly $4.87 billion. Wal-Mart has increased its ownership twice since the partnering with JD.com in June 2016.

This is an important play for Walmart China, where Alibaba has had huge head start and local supply chain advantage. Walmart’s grocery component in China with JD Daojia allows consumers to order online fresh foods which are fulfilled from 20 physical stores and delivered within two hours in select cities.

“Walmart is getting this right. It’s good to see them leveraging their assets (stores/ merchandise) with JD’s expertise in delivery,” noted Annibal Sodero, assistant professor of supply chain at the University of Arkansas.

Wal-Mart’s U.S. division is important for the company’s e-commerce effort given its more than 4,000 retail stores located with 10 miles of 90% of the U.S. population.

AMAZON’S GLOBAL MOVES
But markets in India continue to flourish without Wal-Mart, while Amazon has is growing Indian market share. Amazon has  poured more than $5 billion into India over the past three years ramping up it own namesake in that country. Last Fall Wal-Mart was rumored to be in talks with Indian e-tailer FlipKart, but no deal has been made.

Amazon recently confirmed it agreed to buy 100% of Dubai-based online retailer Souq.com, for an undisclosed amount. Souq.com sells consumer electronics, household items, apparel and other goods and is the most recognized e-tailer in the Middle East. Again this is an area not served by Walmart International.

Sodero said it’s important for Wal-Mart to remember that Amazon is on a mission to win global market share. He said the only way Wal-Mart can compete globally with the likes of Alibaba and Amazon is to partner up with retailers native to certain countries like India, where the laws and cultures can be challenging.

But it appears that Wal-Mart is focused on U.S. online acquisitions. Sodero said the recent acquisitions could end up looking like Frankenstein without a successful integration plan.