Great article in this afternoon’s Wall Street Journal indicates that after years of giving short shrift to the web, Walmart is playing catch-up to Amazon.
- Amazon has become the runaway leader in online sales thanks to a network of more than 40 US warehouses.
- Walmart is creating a vast new logistics system that includes building new warehouses for web orders, in addition to using workers in stores to pack and mail items to customers. Extensive analysis has determined that it is faster and cheaper for Walmart to send some shipments from its 4000 US stores.
- Amazon posted Web sales of $61 billion, compared to an estimated $7.7 billion for Walmart. Last year, online sales rose 16% in the US to $224 billion, and today account for roughly 5% of overall consumer goods sales. According to Forrester Research, that number is expected to double by 2017.
- Ecommerce at Walmart is run as a distinct business, with its own headquarters, CEO, merchants, and P&L. Having said that, e-commerce is a rounding error in the US market. Walmart will manage $10 billion in online sales this year, which is only 2% of its $469 billion in annual revenue.
- Walmart’s online shipping can cost $5-$7 per parcel, while Amazon averages $3-$4 per parcel – a cost differential neck and make a huge difference given the low average order value of an online sale for Walmart.
- Still, ecommerce is now a top priority for Walmart. Two thirds of the US population lives within 5 miles of a Walmart, and trucks arrive daily to replenish these stores.
- The article maintains that the concept of filling ecommerce orders from stores is not entirely new: Macy’s expects 500 stores to be able to fill online orders by this fall, up from 23% when it began the program in 2012.
- For Walmart, ecommerce investments this year will cost $430 million, or approximately $.09 per share. However, executives feel that ecommerce is the future of the company.