The Supply Side: Walmart’s e-commerce profitability achievement took decades

Walmart has been in the e-commerce business for 25 years, but until recently the business that gained traction during the COVID-19 pandemic was mostly an unprofitable business subsidized by store sales.

Execs with the Bentonville-based global retailer said during an April 9 investor conference in Dallas that the U.S. e-commerce business would be profitable in the first quarter ending April 30 and for the year when factoring in revenue growth from advertising and fulfillment revenue. Walmart hinted in previous quarters that its online business in the U.S. was close to becoming cash-flow positive.

Sam’s Club, a much smaller business than Walmart U.S., is already cash-flow positive with its online business, and Walmart Chief Financial Officer John David Rainey said Walmart’s global e-commerce business is not far away from profitability when factoring the growth marketplaces and ancillary sales of advertising and fulfillment in global markets.

“This is a milestone for our company and made possible in part by our growing marketplace business,” Rainey said.

Walmart has consistently grown online sales by more than 10% annually for the past 11 quarters. Last year, Walmart said e-commerce accounted for 18% of its global sales, up from 11% five years prior. The retailer also said it lowered its delivery costs by 20% in the previous quarter for the U.S. business, and the U.S. marketplace revenue grew 37% year over year in the fourth quarter of last year, ending Feb. 1.

With same-day delivery that now reaches 93% of U.S. households, Walmart CEO Doug McMillon said customers trust Walmart for price savings and convenience, which is a winning formula.

While Walmart is improving its e-commerce business, it has been a long road for the retail behemoth. In 2000, Walmart relaunched Walmart.com that focused only on first-party items offered from their existing product page. The business operated separately from stores. In 2009, Walmart opened its platform to third-party sellers, marking the beginning of the Walmart Marketplace.

The online strategy shifted a few years later after McMillon became CEO. In 2016, Walmart acquired Jet.com for $3.3 billion and included Marc Lore to head up Walmart’s online business. Lore sought to grow a higher-margin business for Walmart.com by acquiring over three years of inventory and expertise from digitally native startups.

Walmart acquired ModCloth, Moosejaw, Shoebuy.com, Hayneedle, Eloquii, Bonobos and Bare Necessities and hired Rent the Runway co-founder Jenny Fleiss to head up a concierge e-commerce business in Manhattan dubbed JetBlack. By 2021, Walmart had sold off or shut down most of the acquired businesses, and Lore exited the company in January 2021.

During this period, Walmart’s U.S. online business was bleeding around $1 billion annually that had to be subsidized by store operations and compromised overall growth. Walmart completed the selloffs in 2023 by selling Eloquii and Bonobos. Walmart sold Moosejaw to Dick’s Sporting Goods in 2024.

GROWING MARKETPLACE
Walmart announced in early 2021 that John Furner, CEO of Walmart U.S., would take over the management of Walmart.com, and merchant teams would be consolidated under his watch. Walmart began to concentrate on growing its third-party marketplace. This was a significant shift in online strategy. Walmart also began offering fulfillment services for its marketplace sellers for a fee. Because of Walmart’s scale, it said it could negotiate better shipper rates on behalf of its marketplace sellers.

By early 2022, the company had grown online sales fulfilled by Walmart by 500%. Walmart began holding marketplace summits in 2023, layered on advertising from its Walmart Connect business and gave new sellers a few discounts early which boosted business.

In 2024, Walmart surpassed $100 billion in global online sales for the year. Marketplace sales grew 32% year over year. The number of sellers listing items on Walmart.com grew 20% in the previous fiscal year, the retailer said. In 2024, marketplace sellers on Walmart totaled more than 150,000 with more than 400 million items and brands like Tom’s, Eddie Bauer, Dooney & Burke, and Prada.

McMillon said Marketplace is a way Walmart can reach everyone, and it also allows Walmart to work with entrepreneur sellers and multinational manufacturers to ensure customers can find the brands they want.

INCORPORATING STORES
The combination of Walmart’s digital and physical businesses is a force multiplier for Walmart Marketplace, according to Manish Joneja, Walmart’s head of marketplace and fulfillment services. He said no other marketplace can offer Walmart’s broad customer reach, physical proximity and seamless integration of digital and physical convenience.

Brands like Lume and Beautiful started on Marketplace but now have made their way into Walmart stores. Latriece Watkins, chief merchandising officer for Walmart U.S., said last year the retailer added more than 300 brands to its assortment and increased the number of marketplace sellers by 50% with plans to outpace that growth this year.

“Offering style, quality and price, we can see it in how customers are shopping and what they are buying. We have seen double-digit growth in the digital mix across nearly every category over the last three years, and our e-commerce business has grown 66% during that same time. We are making it easy and speedy as customers can come to us, or we can go to them. Over the last 12 months, we delivered nearly 6 billion units the same or next day,” Watkins said.

E-commerce now accounts for about 17% of total U.S. sales, up 10% since 2020, according to David Guggina, executive vice president of supply chain for Walmart U.S. He said the goal is for online sales to reach a 50% parity with in-store sales.

“We have been on a decade-long journey to reshape the economics of our e-commerce business. We’ve made great progress in realizing benefits from using our stores of local fulfillment nodes, improving inventory position, optimizing route density and seeing customers’ willingness to pay for express,” Guggina said.

Guggina said omnichannel — reaching customers through various shopping options — is the engine behind e-commerce growth. Omni-customers at Walmart shop three times more often and spend on average 13% more per order. He said categories benefiting from increased omni-shopper traffic and purchases include home goods (up 231%), fashion (up 184%), and hardlines — appliances, hardware, pets and toys (up 205%).

“We’ve improved e-commerce economics, cutting losses by 80% over the past year, allowing for profitability,” he said.

EXAMPLE TO FOLLOW
Scott Benedict, a retail consultant and former Walmart exec, said he remembers when then-CEO Mike Duke in 2010 or 2011 began the process of integrating the profit and loss statements of the two separate businesses. Benedict said stores could be credited for online sales that were fulfilled by their stores. He said Walmart built on that, incorporating the two businesses under Furner in 2021.

Benedict said it was not always smooth sailing, but with the customer focus at the forefront, Walmart did eventually integrate its inventory system so it could know what it had and where it was located at all times.

Benedict said there were a multitude of smaller successes that eventually overshadowed the failed experiment years under Lore. He said once Walmart began focusing on customer needs and did the work to become an omni retailer, profitability was possible. He is not surprised to see Walmart reach profitability in the U.S. e-commerce business because of the investments made and resources aligned to meet customers where they are.

“Retailers can learn from Walmart’s journey. There are plenty of retailers that still operate the online and in-store businesses separately. Until they are fully integrated like Walmart, companies will not achieve efficiency or profitability,” Benedict said.

Editor’s note: The Supply Side section of Talk Business & Politics focuses on the companies, organizations, issues and individuals engaged in providing products and services to retailers. The Supply Side is managed by Talk Business & Politics, and is sponsored by HRG.