Is Walmart at an online crossroads?
Source: Walmart

Despite wide external praise for accelerating online growth, Walmart is frustrated internally by the steep losses it has incurred by online operations and its struggles trying to catch up to Amazon.com.

According to a report that came from multiple sources:

  • Walmart’s U.S. e-commerce division is expected to lose more than $1 billion this year on revenue of between $21 billion and $22 billion. The losses run counter to Walmart’s longstanding commitment to profitable ventures.
  • All three of Walmart’s digital-native apparel companies, Bonobos, ModCloth and Eloquii, are unprofitable, and ModCloth is expected to be sold this year in a cost-cutting move. Walmart is putting purchases of additional digital-native brands on hold for at least the next year unless a can’t-miss opportunity arrives.
  • Greg Foran, president and CEO, Walmart U.S., is pushing for more practical investments, such as reducing prices, over digital initiatives that may not scale. He also believes Marc Lore, who leads Walmart’s online operations, is getting too much credit for growing online grocery when the business relies heavily on curbside pickup.

The inner turbulence was signaled by Walmart’s move in mid-June to fold Jet.com’s team into its corporate web organization.

Walmart continues to invest online, including its May announcement to offer free, next-day shipping on a curated selection of up to 220,000 items with no membership fee. 

But Mr. Lore is under pressure to reduce losses, and the investments necessary to compete on par with Amazon are being questioned by some inside Walmart. According to eMarketer, Amazon has 38 percent online share versus 4.7 percent for Walmart. 

Amazon has 110 fulfillment centers in the U.S. versus fewer than 20 for Walmart. It also has access to many more brands and its Prime membership fees help offset costs.

Some executives believe Walmart should largely be focusing on building a larger online grocery business than Amazon as others worry about the impact of scaled-down ambitions on Wall Street and employee morale.

The report came largely as a surprise as Walmart’s first quarter online sales jumped 37 percent on top of 2018’s gain of 40 percent, again boosted by online grocery.

BrainTrust

“Focusing on click and collect and finding ways to continue to support the unbanked is their best strategy going forward. “

Paula Rosenblum

Co-founder, RSR Research


“Digital is different, but it’s time for Walmart to leverage their massive profitable retail footprint to change the game.”

Bethany Allee

Senior Vice President Marketing, PDI


“Bricks and clicks are simply two modes of the same thing: the FINAL connection of producers to consumers.”

Herb Sorensen

Scientific Advisor Kantar Retail; Adjunct Ehrenberg-Bass; Shopper Scientist LLC

Discussion Questions

DISCUSSION QUESTIONS: Should Walmart scale back its ambitions for its e-commerce business? What are some realistic goals to guide Walmart’s online strategy in the years ahead?

Poll

Do you see more benefits or drawbacks to Walmart narrowing its online focus to leading online grocery?

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29 responses to “Is Walmart at an online crossroads?”

  1. Mark Ryski Avatar
    Mark Ryski

    If Walmart can’t make money at its current e-commerce business, it makes you wonder if anyone can. Being profitable and conducting an epic market share battle with Amazon seem to be mutually exclusive strategies. I think it’s right that Walmart management intends to put some guardrails around their online business and focus their online effort on a key strength, grocery. Amazon has a prolific web services business to offset losses – Walmart doesn’t have the same advantage.

    1. Bethany Allee Avatar
      Bethany Allee

      What Mark said.

      Walmart is gaining share right now (they’re up 0.7 percent in overall e-commerce), but they need to gain share faster to combat Amazon. The only way for Walmart to compete and accelerate their online growth is to change the game.

      They’re focused on reducing costs in the middle mile. This is a good start.

      Walmart needs to remember that they are the OG “category killer.” They have a playbook of how they crushed markets in the ’80s. It’s time to dig into the vault and look at what worked in combating their local market domination and what didn’t.

      Digital is different, but it’s time for Walmart to leverage their massive profitable retail footprint to change the game.

  2. Michael La Kier Avatar
    Michael La Kier

    To call out Walmart as being at an online crossroads is unfair — the fact of the matter is everyone is playing catch up to Amazon. The key to success is to not focus externally, but internally. Walmart must leverage their own unique strategic advantages as they explore what shoppers want. If they try to compete on Amazon’s turf they will lose. If they use their own strengths (BOPIS, grocery, etc.) they can grow their online sales without losing their shirts!

  3. Shep Hyken Avatar
    Shep Hyken

    In almost all of these types of articles, Walmart (and other big retailers) are compared to Amazon. I’m not sure if Walmart should scale back or push for more online business, but I do know this: Walmart can compete compete against Amazon, or compete to win the customer’s business. What does and what will the customer want? That’s a big part of the battle for online and traditional retail.

  4. Oliver Guy Avatar
    Oliver Guy

    Every time Walmart made such an acquisition over the past few years I got a little excited – hoping they could take learnings and apply them across the rest of the business.

    Who knows why they have failed to do this. Cultural differences could well be a major part (which I have seen elsewhere when small niche players have been acquired). Innovating from within could well be the answer – we see lots of that from Walmart but there is always room for more.

  5. Phil Masiello Avatar
    Phil Masiello

    Acquiring unprofitable e-commerce businesses and folding them into an unprofitable infrastructure does not lead to profitability. That only will work when you have built a profitable infrastructure and can fold in other acquisitions to add scale. The Jet.com infrastructure was not profitable and had no chance of ever being profitable.

    Walmart needs to focus on what it can do best. That is grocery and pharma with both a rapid delivery and curbside pickup mechanism. Trying to move into fashion and other categories where the brand has no credibility is not very good business.

    Walmart should shut down Jet.com and eliminate non-core e-commerce brands and focus on their core competency.

  6. Peter Charness Avatar
    Peter Charness

    How much did Amazon lose in their first three to five years of building out capability for online retail? I wonder what Walmart is capitalizing vs. expensing to get to a $1 billion single year loss. Selling commodity products in stores only (or mostly) is not a great alternative either.

  7. Ben Ball Avatar
    Ben Ball

    This sounds more like a culture conflict than an operations problem. Jack Welch is credited with saying (to paraphrase) “Successful mergers and acquisitions are 10 percent strategy and 90 percent culture.” Folding Jet.com into traditional Walmart should happen naturally — forcing it now does not bode well. Perhaps current Walmart leadership does not believe the attitude and effort necessary to establish a viable online presence are critical to its survival. I hope that’s not the case. I didn’t enjoy writing about Sears either.

  8. Neil Saunders Avatar
    Neil Saunders

    Online retail has never been a particularly profitable business, mainly because consumers do not bear the full costs of the service. And with a push on fast, low- or no-cost delivery, things are arguably getting worse. That said, it is a necessary evil for retailers: if they don’t engage with online they risk losing sales and market share.

    Walmart is in a challenging position as it is a business that operates at an enormous scale and has a big grocery operation – a sector where online makes virtually no money. As such, losses for its online operation are amplified.

    In my view, Walmart’s push into e-commerce has not been wrong. However, it is right to consolidate its various digital assets and to try and find ways of streamlining the operation. If it uses its store base and existing logistics correctly, it should have an advantage over other players, including Amazon.

  9. Jeff Sward Avatar
    Jeff Sward

    Walmart is at a perpetual crossroads when it comes to competing with Amazon. If they could say, “give us two to three years and these losses/investments will begin to pay off” then maybe this could all be rationalized. I don’t think Amazon’s decade+ of losses is going to fly here. The effort is to be applauded, but at what price comes the glory?

  10. Brandon Rael Avatar
    Brandon Rael

    It’s key to note that any digital transformation, even for companies as massive as Walmart, is very much a marathon rather than a sprint. Short term losses should not deter Walmart from scaling back their digital transformation as a brand. Walmart has driven some significant innovation with its Jet.com, Bonobos, ModCloth, and Eloquii acquisitions, which has led to not only an incremental amount of online business but more traffic to its stores.

    Walmart should take a more holistic view of their business. The digital and mobile business will drive additional sales across channels, but BOPIS and other fulfillment options will drive more customers to their stores. While Amazon may have the advantage with their fulfillment centers, Walmart certainly has its omnipresent stores, which could be leveraged as pickup points for products.

    There may be some trial and error to come, but that is part of the innovation process. We should expect Walmart to be a force in the e-commerce world for a long time to come.

  11. Chris Petersen, PhD. Avatar
    Chris Petersen, PhD.

    There is no choice. The “e” in e-commerce now stands for everywhere everyday. Consumers no longer separate channels.

  12. Paula Rosenblum Avatar
    Paula Rosenblum

    I don’t wonder about whether anyone can make money selling groceries or other low-priced products online. I am quite sure they cannot.

    Walmart is in the amusing (if you lived through their period of insane store growth in the U.S.) position of having to sell at a loss to maintain market share.

    I would advise them to stop trying to “beat Amazon” and focus on what they’re good at – the company is one-stop shopping for commodities. That’s their lane, and especially in under-served areas.

    Focusing on click and collect and finding ways to continue to support the unbanked is their best strategy going forward. I don’t think it’s in their best interest to shift the thrust online.

  13. Dick Seesel Avatar
    Dick Seesel

    Walmart can’t be happy about a $1 billion loss on its e-commerce business, but it needs to recognize that there is some “investment spending” needed to build out its overall omnichannel footprint. The company doesn’t have Amazon’s profit cushion of AWS to cover the logistics and margin costs of e-commerce — especially when customers’ expectations of “cheaper and faster” get higher every day. So it’s a tough challenge: How to stick to an essential market share strategy while paring away unnecessary costs?

  14. Adrian Weidmann Avatar
    Adrian Weidmann

    In order to get a first-hand look into the e-commerce business, I recently spent several months working retail for a big box retailer. The experience was enlightening and invaluable. Whatever is being discussed and rationalized at corporate is completely out-of-touch with the reality at the store level. While it may be a great time for consumers, retailers seem to be reacting to customers and trends rather than using logical foresight. Retailers are chasing the puck rather than, as Wayne Gretzky is quoted as saying, “skating to where the puck is going.”
    Anyone competing in retail with Amazon is at a disadvantage because of Amazon’s lucrative web services business. This revenue allows Amazon to lose money yet still be profitable. Walmart has stores and should focus on that advantage and all that it has to offer.

  15. Bill Hanifin Avatar
    Bill Hanifin

    Walmart should maintain its focus on the ultimate goal – leadership, success, and profitability in its e-commerce activities — but should review strategy and jettison the parts of the current plan that are sucking cash out of the business.

    Maybe growth through acquisition of boutique brands seemed like the way to get an edge on competitors at the time, but it seems that approach needs to be reevaluated.

    Also, Walmart has taken on the image of the follower rather than leader vis a vis Amazon. I think the drive to deliver in one day or “next day” is bait that Walmart did not have to take.

    Walmart needs to keep its focus on success in e-commerce, just chart a new and proprietary course.

  16. Gene Detroyer Avatar
    Gene Detroyer

    For how many years did we criticize Amazon for not being profitable? Fifteen years? Twenty years?

    Here is Walmart’s decision; be part of the future of retail or not. Why would you cut back on the growing trend? The basic Walmart business is mature and while an excellent business, is not growing in real terms.

  17. Tony Orlando Avatar
    Tony Orlando

    I’ve been saying this for years. The lust for continued growth in online by the big boys is costing them tons of money, and yet they refuse to charge their customers for BOPIS and free deliveries, hoping guys like me and many other small regional chains will close down. If and when that happens, free delivery will no longer be free.

    Our industry has the smallest margins on our goods, and for me to do free delivery it will hasten my exit from this business. I charge enough to cover my costs on catering drop offs, which no one complains about. Where this, ends who knows? But to continue losing a billion dollars a year is just plain dumb. Nothing is free, and never has been.

  18. Mark Heckman Avatar
    Mark Heckman

    I experienced the “joy” of losing money (and sometimes my mind) launching a grocery home delivery service 25 years ago and the business dynamics since have not changed that much. Retailers who have built their economic model on the premise that the shopper will do most of the heavy lifting, that is driving to the store, traipsing through multiple aisles filling their baskets and then checking themselves out using a very user-unfriendly self-checkout, will find that the road to profitable e-commerce, whether it be BOPIS or delivery, very painful. Key to eventually finding an “happy place” with e-commerce will be the retailer’s ability to view the customer holistically and understand the importance of that service as it pertains to keeping a healthy “share of customer.” Obviously Walmart cannot (and will not) continue to lose the kinds of dollars it currently is losing. However it is often necessary to offer services that individually contribute negatively to the profits but are important to retain loyal shoppers who drive profitability when visiting the store and doing all the work.

  19. Ken Lonyai Avatar
    Ken Lonyai

    Per previous comments I’ve made, it has often seemed that Walmart’s deep pockets have been a vehicle for Marc Lore to get back at Bezos more than a resource for him to leverage to grow the brand’s online presence. I’ve also been doubtful of these PR purchases of brands that don’t fit Walmart’s core customer. Either the company needs to do what it has always done, better, or look for a new market demographic. Attempting to do both is very costly as this article reveals.

    Whole Foods is a failure for Amazon (doubters you’ll see!) although Amazon’s grocery sales are probably okay. I agree that online grocery is an area Walmart could/should focus on because Kroger is stepping up hugely and if Walmart doesn’t do so quickly, yet another window of opportunity will close on them.

    BTW – I predict Marc Lore will be gone in less than two years and he’ll quickly start a new venture, either because he’s planning it now, or to cover being fired.

  20. Ananda Chakravarty Avatar
    Ananda Chakravarty

    $1 billion is a lot of money but, for Walmart, with $129 billion in gross profits, it’s less than a 1 percent cost that not only stems the tide of customers rushing over to other online players (not to be named) but also drives critical services for customers. When combined with their overall customer offering and their low price strategy, e-commerce still makes sense for Walmart. No, this isn’t a crossroads. With great Q1 results, it’s the perfect time to remove the non-performing inefficiency found in its side businesses and it provides a way for Jet and ModCloth, etc. to truly be merged into the broader Walmart machine. E-commerce is here to stay and continues to grow — linearly, so Walmart needs to keep it in its portfolio for customers — linearly.

  21. Herb Sorensen Avatar
    Herb Sorensen

    Everyone is at a crossroads! There are nearing 8 billion people on earth, and those 8 billion are increasingly connected to the rest of the 8 billion, and will become one-on-one connected, yet — not just through nodes. The significance of this to retail is that retail is the ultimate nexus of the human race.

    Most of that human race is diligently working to provide products/services, etc. to some slice of the rest of the race, and receive payment — cash at the checkout, wages or other compensation — from the economic engine of the world, for their own contribution. This fuels their ability to access the contributions of the rest of the world, to them, for their own personal/family/business activities.

    Retail is the focal point of prosperity, and the future of the race. Bricks and clicks are simply two modes of the same thing: the FINAL connection of producers to consumers. That final connection of all is actually “Inside the Mind of the Shopper!” where the buy-switch matches the sell-offering on the display, or other mode of retail sales.

    In this context, Walmart and Amazon are both in nearly identical businesses, with some obvious adjustments in modality. But BOTH are struggling to steal customers from the other. Competition is the essence of human progress, and is most beneficial to society when BOTH win! Ahem! But a little deeper understanding of the strengths and weaknesses is in order — not that the surface facts aren’t readily apparent.

    In many ways, this from the RetailWire discussion captures the essence of the problem, Walmart vis-a-vis Amazon: “Amazon has 110 fulfillment centers in the U.S. versus fewer than 20 for Walmart. It also has access to many more brands and its Prime membership fees help offset costs.” Not many years ago, Walmart was the premier logistics organization in the world — surpassing even the US military. Today, Amazon has built a modern logistics capability, well advanced in automation and AI, from scratch, while Walmart has massive backward-looking capital in place for what is the principle function of the supply side of that “mind-of the shopper” trigger!

    Also, Amazon is using a screen display, and “step-by-step algorithmic process” to assist the shopper to do their “SELF-service”, self-selling shopping. Efficient, and near instant access to “The Everything Store.” PLUS, instant mental access to close the sale for all those ITEMS, one at a time, with “1-Click” checkout! Against this, Walmart continues their massive “parked capital” approach with “100,000” sq ft stores and “100,000” items, when the single most common basket at Walmart contains THREE items!

    None of this condemns Walmart to the path of Sears. Walmart is still far closer to the reality of “the neighborhood pantry.” ALL supermarkets essentially serve that role. One thing for sure is that Amazon’s forays into bricks retailing — Whole Foods, in particular — demonstrate that Amazon is inheriting the soul of the century old self-service bricks retailers. The very “soul” that Walmart nearly perfected, for “the world that then was.”

    I summarize the playing field with the unassailable advantages of clicks and bricks, ALL of which will be manifest in the ultimate winner(s) of the bricks/clicks competition:

    For clicks:

    1. Algorithmic, mental step-by-step guidance of the shopper mind to “YES, I’ll take it!”
    2. Near infinite potential offering – low capital cost provision of “everything” in the offering.

    For bricks:

    1. INSTANT delivery of those few items needed RIGHT NOW, into the hands of the shopper.
    2. The 360 EXPERIENCE of all the senses, of a total environment, store, other shoppers, sight, sound, aroma in the “acquisition” context.

    May ALL the best shopper servers thrive!

    1. Gene Detroyer Avatar
      Gene Detroyer

      Outstanding comments.

    2. James Tenser Avatar
      James Tenser

      Well-stated, Herb. Retail is indeed a fundamental human activity and an engine for prosperity. Its methods will always be in flux and its competitors will never stop jockeying for positioning in the marketplace.

      So what if Walmart is continuing to make strategic adjustments to its approach to e-commerce? Stagnation is the enemy here. For a massive company with a great deal of “fixed capital,” Walmart has shown a remarkable willingness to experiment in the last few years. That seems healthy to me.

  22. Steve Dennis Avatar
    Steve Dennis

    First of all, the notion of an e-commerce business vs. a brick & mortar business is how many got into trouble in the first place. Virtually every customer is active across all touchpoints and, digitally-influenced physical store sales dwarf e-commerce.

    Second, the way to look at this is not by channel, but first, by customer and second by trade-area with the understanding the physical influences digital and vice versa. The customer is the channel.

    Third, no one will ever be able to out Amazon Amazon and the problem with a race to the bottom is you might win, or worse, finish second (Seth Godin).

    Walmart should not scale back its ambition per se, but they should focus them on growing their customer base and customer lifetime value, regardless of channel. That will guide which digital, physical and harmonized investments make the most sense.

  23. David Naumann Avatar
    David Naumann

    Walmart can’t afford to scale back its e-commerce ambitions, as e-commerce will continue to increase and winning depends on solving the cost issues. Focusing on its core e-commerce business is a smart strategy to avoid shinny objects and distractions.

    Walmart is an extremely successful company that has built its empire on efficient operating processes. Applying the same relentless cost reduction disciplines to its e-commerce business should eventually make it a profitable segment for Walmart. Never underestimate Amazon or Walmart.

  24. Ken Morris Avatar
    Ken Morris

    While e-commerce should remain a focus, the fact is that Walmart is generally playing “catch-up” with Amazon by reacting to their moves in the marketplace. Walmart should continue to focus on its online and in-store grocery business as that is a core strength for the company and leverages its current strong customer base. Walmart has the advantage of numerous physical locations across the country (90% of the population lives within a 10 mile radius of a Walmart store) and should be looking for ways to enhance its current customers’ online and in-store experiences by leveraging stores as distribution centers to encourage brand loyalty.

  25. Ricardo Belmar Avatar
    Ricardo Belmar

    A few thoughts immediately occur to me upon reading this article. First, deciding to focus on grocery sales online vs everything else is not a customer-first decision, but rather a convenient accounting decision (how 20th century retail of them!) and a channel-focused one at that. Second, there is a lack of perspective — even a $1B loss (though nothing to sneeze at!) is a blip in terms of overall Walmart profits. Third, looking at e-commerce sales as your one-and-only metric of success is again a channel-centric view vs a customer-centric view of your retail business.

    We have witnessed over the past year plus what to those of us on the outside looking in appeared to be a completely different approach to retail by Walmart starting with those digital-native acquisitions, to Store No 8, to AI-led experimental stores in the northeast and Canada, to BOPIS improvements, and mobile app developments. Now, we see what appears to be 20th century retail business thinking manifesting itself and creating self-doubt about the overall strategy. All within a year!
    It’s tough to let in-depth retail strategies like these — at scale — play out in a year or less. Walmart needs to consider this an investment, not in the e-commerce channel, but in serving its customers better than others. It’s not a race against Amazon but a race to satisfy their existing customers and to bring in new customers.

    At some level, they must realize that their everyday low price strategy has provided a solid customer base, but one that doesn’t have much room to grow. Finding new customers outside that base will require experimenting, and investing in new services, new channels, new everything — until they find the right mix. This is true for ALL retailers, but Walmart is uniquely positioned in that they have the ability to absorb the costs for this exploration until they learn how to get it right! Now isn’t the time to slow down!

  26. Cate Trotter Avatar
    Cate Trotter

    The comparisons with Amazon are always difficult because Amazon isn’t in the same business as Walmart — not really. Amazon makes its money from its web services business, not its retailing. It loses money from retail, even with customers paying into Prime. It’s not difficult to understand then why someone like Walmart might also be losing money when trying to compete with it. The question is whether it really needs to? (Directly compete that is).

    Customers go back to Amazon again and again for convenience over anything else. What Walmart needs to do is focus on how it can give customers what they want — a convenient shopping experience — and then build an ecosystem (of online and offline touchpoints) that serves that. Ecommerce should certainly be part of this, but only if it’s offering something of value to the customer rather than for the sake of “keeping up” with Bezos.

29 Comments
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Mark Ryski
Mark Ryski
4 years ago

If Walmart can’t make money at its current e-commerce business, it makes you wonder if anyone can. Being profitable and conducting an epic market share battle with Amazon seem to be mutually exclusive strategies. I think it’s right that Walmart management intends to put some guardrails around their online business and focus their online effort on a key strength, grocery. Amazon has a prolific web services business to offset losses – Walmart doesn’t have the same advantage.

Bethany Allee
Bethany Allee
  Mark Ryski
4 years ago

What Mark said.

Walmart is gaining share right now (they’re up 0.7 percent in overall e-commerce), but they need to gain share faster to combat Amazon. The only way for Walmart to compete and accelerate their online growth is to change the game.

They’re focused on reducing costs in the middle mile. This is a good start.

Walmart needs to remember that they are the OG “category killer.” They have a playbook of how they crushed markets in the ’80s. It’s time to dig into the vault and look at what worked in combating their local market domination and what didn’t.

Digital is different, but it’s time for Walmart to leverage their massive profitable retail footprint to change the game.

Michael La Kier
Michael La Kier
4 years ago

To call out Walmart as being at an online crossroads is unfair — the fact of the matter is everyone is playing catch up to Amazon. The key to success is to not focus externally, but internally. Walmart must leverage their own unique strategic advantages as they explore what shoppers want. If they try to compete on Amazon’s turf they will lose. If they use their own strengths (BOPIS, grocery, etc.) they can grow their online sales without losing their shirts!

Shep Hyken
Shep Hyken
4 years ago

In almost all of these types of articles, Walmart (and other big retailers) are compared to Amazon. I’m not sure if Walmart should scale back or push for more online business, but I do know this: Walmart can compete compete against Amazon, or compete to win the customer’s business. What does and what will the customer want? That’s a big part of the battle for online and traditional retail.

Oliver Guy
Oliver Guy
4 years ago

Every time Walmart made such an acquisition over the past few years I got a little excited – hoping they could take learnings and apply them across the rest of the business.

Who knows why they have failed to do this. Cultural differences could well be a major part (which I have seen elsewhere when small niche players have been acquired). Innovating from within could well be the answer – we see lots of that from Walmart but there is always room for more.

Phil Masiello
Phil Masiello
4 years ago

Acquiring unprofitable e-commerce businesses and folding them into an unprofitable infrastructure does not lead to profitability. That only will work when you have built a profitable infrastructure and can fold in other acquisitions to add scale. The Jet.com infrastructure was not profitable and had no chance of ever being profitable.

Walmart needs to focus on what it can do best. That is grocery and pharma with both a rapid delivery and curbside pickup mechanism. Trying to move into fashion and other categories where the brand has no credibility is not very good business.

Walmart should shut down Jet.com and eliminate non-core e-commerce brands and focus on their core competency.

Peter Charness
Peter Charness
4 years ago

How much did Amazon lose in their first three to five years of building out capability for online retail? I wonder what Walmart is capitalizing vs. expensing to get to a $1 billion single year loss. Selling commodity products in stores only (or mostly) is not a great alternative either.

Ben Ball
Ben Ball
4 years ago

This sounds more like a culture conflict than an operations problem. Jack Welch is credited with saying (to paraphrase) “Successful mergers and acquisitions are 10 percent strategy and 90 percent culture.” Folding Jet.com into traditional Walmart should happen naturally — forcing it now does not bode well. Perhaps current Walmart leadership does not believe the attitude and effort necessary to establish a viable online presence are critical to its survival. I hope that’s not the case. I didn’t enjoy writing about Sears either.

Neil Saunders
Neil Saunders
4 years ago

Online retail has never been a particularly profitable business, mainly because consumers do not bear the full costs of the service. And with a push on fast, low- or no-cost delivery, things are arguably getting worse. That said, it is a necessary evil for retailers: if they don’t engage with online they risk losing sales and market share.

Walmart is in a challenging position as it is a business that operates at an enormous scale and has a big grocery operation – a sector where online makes virtually no money. As such, losses for its online operation are amplified.

In my view, Walmart’s push into e-commerce has not been wrong. However, it is right to consolidate its various digital assets and to try and find ways of streamlining the operation. If it uses its store base and existing logistics correctly, it should have an advantage over other players, including Amazon.

Jeff Sward
Jeff Sward
4 years ago

Walmart is at a perpetual crossroads when it comes to competing with Amazon. If they could say, “give us two to three years and these losses/investments will begin to pay off” then maybe this could all be rationalized. I don’t think Amazon’s decade+ of losses is going to fly here. The effort is to be applauded, but at what price comes the glory?

Brandon Rael
Brandon Rael
4 years ago

It’s key to note that any digital transformation, even for companies as massive as Walmart, is very much a marathon rather than a sprint. Short term losses should not deter Walmart from scaling back their digital transformation as a brand. Walmart has driven some significant innovation with its Jet.com, Bonobos, ModCloth, and Eloquii acquisitions, which has led to not only an incremental amount of online business but more traffic to its stores.

Walmart should take a more holistic view of their business. The digital and mobile business will drive additional sales across channels, but BOPIS and other fulfillment options will drive more customers to their stores. While Amazon may have the advantage with their fulfillment centers, Walmart certainly has its omnipresent stores, which could be leveraged as pickup points for products.

There may be some trial and error to come, but that is part of the innovation process. We should expect Walmart to be a force in the e-commerce world for a long time to come.

Chris Petersen, PhD.
Chris Petersen, PhD.
4 years ago

There is no choice. The “e” in e-commerce now stands for everywhere everyday. Consumers no longer separate channels.

Paula Rosenblum
Paula Rosenblum
4 years ago

I don’t wonder about whether anyone can make money selling groceries or other low-priced products online. I am quite sure they cannot.

Walmart is in the amusing (if you lived through their period of insane store growth in the U.S.) position of having to sell at a loss to maintain market share.

I would advise them to stop trying to “beat Amazon” and focus on what they’re good at – the company is one-stop shopping for commodities. That’s their lane, and especially in under-served areas.

Focusing on click and collect and finding ways to continue to support the unbanked is their best strategy going forward. I don’t think it’s in their best interest to shift the thrust online.

Dick Seesel
Dick Seesel
4 years ago

Walmart can’t be happy about a $1 billion loss on its e-commerce business, but it needs to recognize that there is some “investment spending” needed to build out its overall omnichannel footprint. The company doesn’t have Amazon’s profit cushion of AWS to cover the logistics and margin costs of e-commerce — especially when customers’ expectations of “cheaper and faster” get higher every day. So it’s a tough challenge: How to stick to an essential market share strategy while paring away unnecessary costs?

Adrian Weidmann
Adrian Weidmann
4 years ago

In order to get a first-hand look into the e-commerce business, I recently spent several months working retail for a big box retailer. The experience was enlightening and invaluable. Whatever is being discussed and rationalized at corporate is completely out-of-touch with the reality at the store level. While it may be a great time for consumers, retailers seem to be reacting to customers and trends rather than using logical foresight. Retailers are chasing the puck rather than, as Wayne Gretzky is quoted as saying, “skating to where the puck is going.”
Anyone competing in retail with Amazon is at a disadvantage because of Amazon’s lucrative web services business. This revenue allows Amazon to lose money yet still be profitable. Walmart has stores and should focus on that advantage and all that it has to offer.

Bill Hanifin
Bill Hanifin
4 years ago

Walmart should maintain its focus on the ultimate goal – leadership, success, and profitability in its e-commerce activities — but should review strategy and jettison the parts of the current plan that are sucking cash out of the business.

Maybe growth through acquisition of boutique brands seemed like the way to get an edge on competitors at the time, but it seems that approach needs to be reevaluated.

Also, Walmart has taken on the image of the follower rather than leader vis a vis Amazon. I think the drive to deliver in one day or “next day” is bait that Walmart did not have to take.

Walmart needs to keep its focus on success in e-commerce, just chart a new and proprietary course.

Gene Detroyer
Gene Detroyer
4 years ago

For how many years did we criticize Amazon for not being profitable? Fifteen years? Twenty years?

Here is Walmart’s decision; be part of the future of retail or not. Why would you cut back on the growing trend? The basic Walmart business is mature and while an excellent business, is not growing in real terms.

Tony Orlando
Tony Orlando
4 years ago

I’ve been saying this for years. The lust for continued growth in online by the big boys is costing them tons of money, and yet they refuse to charge their customers for BOPIS and free deliveries, hoping guys like me and many other small regional chains will close down. If and when that happens, free delivery will no longer be free.

Our industry has the smallest margins on our goods, and for me to do free delivery it will hasten my exit from this business. I charge enough to cover my costs on catering drop offs, which no one complains about. Where this, ends who knows? But to continue losing a billion dollars a year is just plain dumb. Nothing is free, and never has been.

Mark Heckman
Mark Heckman
4 years ago

I experienced the “joy” of losing money (and sometimes my mind) launching a grocery home delivery service 25 years ago and the business dynamics since have not changed that much. Retailers who have built their economic model on the premise that the shopper will do most of the heavy lifting, that is driving to the store, traipsing through multiple aisles filling their baskets and then checking themselves out using a very user-unfriendly self-checkout, will find that the road to profitable e-commerce, whether it be BOPIS or delivery, very painful. Key to eventually finding an “happy place” with e-commerce will be the retailer’s ability to view the customer holistically and understand the importance of that service as it pertains to keeping a healthy “share of customer.” Obviously Walmart cannot (and will not) continue to lose the kinds of dollars it currently is losing. However it is often necessary to offer services that individually contribute negatively to the profits but are important to retain loyal shoppers who drive profitability when visiting the store and doing all the work.

Ken Lonyai
Ken Lonyai
4 years ago

Per previous comments I’ve made, it has often seemed that Walmart’s deep pockets have been a vehicle for Marc Lore to get back at Bezos more than a resource for him to leverage to grow the brand’s online presence. I’ve also been doubtful of these PR purchases of brands that don’t fit Walmart’s core customer. Either the company needs to do what it has always done, better, or look for a new market demographic. Attempting to do both is very costly as this article reveals.

Whole Foods is a failure for Amazon (doubters you’ll see!) although Amazon’s grocery sales are probably okay. I agree that online grocery is an area Walmart could/should focus on because Kroger is stepping up hugely and if Walmart doesn’t do so quickly, yet another window of opportunity will close on them.

BTW – I predict Marc Lore will be gone in less than two years and he’ll quickly start a new venture, either because he’s planning it now, or to cover being fired.

Ananda Chakravarty
Ananda Chakravarty
4 years ago

$1 billion is a lot of money but, for Walmart, with $129 billion in gross profits, it’s less than a 1 percent cost that not only stems the tide of customers rushing over to other online players (not to be named) but also drives critical services for customers. When combined with their overall customer offering and their low price strategy, e-commerce still makes sense for Walmart. No, this isn’t a crossroads. With great Q1 results, it’s the perfect time to remove the non-performing inefficiency found in its side businesses and it provides a way for Jet and ModCloth, etc. to truly be merged into the broader Walmart machine. E-commerce is here to stay and continues to grow — linearly, so Walmart needs to keep it in its portfolio for customers — linearly.

Herb Sorensen
Herb Sorensen
4 years ago

Everyone is at a crossroads! There are nearing 8 billion people on earth, and those 8 billion are increasingly connected to the rest of the 8 billion, and will become one-on-one connected, yet — not just through nodes. The significance of this to retail is that retail is the ultimate nexus of the human race.

Most of that human race is diligently working to provide products/services, etc. to some slice of the rest of the race, and receive payment — cash at the checkout, wages or other compensation — from the economic engine of the world, for their own contribution. This fuels their ability to access the contributions of the rest of the world, to them, for their own personal/family/business activities.

Retail is the focal point of prosperity, and the future of the race. Bricks and clicks are simply two modes of the same thing: the FINAL connection of producers to consumers. That final connection of all is actually “Inside the Mind of the Shopper!” where the buy-switch matches the sell-offering on the display, or other mode of retail sales.

In this context, Walmart and Amazon are both in nearly identical businesses, with some obvious adjustments in modality. But BOTH are struggling to steal customers from the other. Competition is the essence of human progress, and is most beneficial to society when BOTH win! Ahem! But a little deeper understanding of the strengths and weaknesses is in order — not that the surface facts aren’t readily apparent.

In many ways, this from the RetailWire discussion captures the essence of the problem, Walmart vis-a-vis Amazon: “Amazon has 110 fulfillment centers in the U.S. versus fewer than 20 for Walmart. It also has access to many more brands and its Prime membership fees help offset costs.” Not many years ago, Walmart was the premier logistics organization in the world — surpassing even the US military. Today, Amazon has built a modern logistics capability, well advanced in automation and AI, from scratch, while Walmart has massive backward-looking capital in place for what is the principle function of the supply side of that “mind-of the shopper” trigger!

Also, Amazon is using a screen display, and “step-by-step algorithmic process” to assist the shopper to do their “SELF-service”, self-selling shopping. Efficient, and near instant access to “The Everything Store.” PLUS, instant mental access to close the sale for all those ITEMS, one at a time, with “1-Click” checkout! Against this, Walmart continues their massive “parked capital” approach with “100,000” sq ft stores and “100,000” items, when the single most common basket at Walmart contains THREE items!

None of this condemns Walmart to the path of Sears. Walmart is still far closer to the reality of “the neighborhood pantry.” ALL supermarkets essentially serve that role. One thing for sure is that Amazon’s forays into bricks retailing — Whole Foods, in particular — demonstrate that Amazon is inheriting the soul of the century old self-service bricks retailers. The very “soul” that Walmart nearly perfected, for “the world that then was.”

I summarize the playing field with the unassailable advantages of clicks and bricks, ALL of which will be manifest in the ultimate winner(s) of the bricks/clicks competition:

For clicks:

  1. Algorithmic, mental step-by-step guidance of the shopper mind to “YES, I’ll take it!”
  2. Near infinite potential offering – low capital cost provision of “everything” in the offering.

For bricks:

  1. INSTANT delivery of those few items needed RIGHT NOW, into the hands of the shopper.
  2. The 360 EXPERIENCE of all the senses, of a total environment, store, other shoppers, sight, sound, aroma in the “acquisition” context.

May ALL the best shopper servers thrive!

Gene Detroyer
Gene Detroyer
  Herb Sorensen
4 years ago

Outstanding comments.

James Tenser
James Tenser
  Herb Sorensen
4 years ago

Well-stated, Herb. Retail is indeed a fundamental human activity and an engine for prosperity. Its methods will always be in flux and its competitors will never stop jockeying for positioning in the marketplace.

So what if Walmart is continuing to make strategic adjustments to its approach to e-commerce? Stagnation is the enemy here. For a massive company with a great deal of “fixed capital,” Walmart has shown a remarkable willingness to experiment in the last few years. That seems healthy to me.

Steve Dennis
Steve Dennis
4 years ago

First of all, the notion of an e-commerce business vs. a brick & mortar business is how many got into trouble in the first place. Virtually every customer is active across all touchpoints and, digitally-influenced physical store sales dwarf e-commerce.

Second, the way to look at this is not by channel, but first, by customer and second by trade-area with the understanding the physical influences digital and vice versa. The customer is the channel.

Third, no one will ever be able to out Amazon Amazon and the problem with a race to the bottom is you might win, or worse, finish second (Seth Godin).

Walmart should not scale back its ambition per se, but they should focus them on growing their customer base and customer lifetime value, regardless of channel. That will guide which digital, physical and harmonized investments make the most sense.

David Naumann
David Naumann
4 years ago

Walmart can’t afford to scale back its e-commerce ambitions, as e-commerce will continue to increase and winning depends on solving the cost issues. Focusing on its core e-commerce business is a smart strategy to avoid shinny objects and distractions.

Walmart is an extremely successful company that has built its empire on efficient operating processes. Applying the same relentless cost reduction disciplines to its e-commerce business should eventually make it a profitable segment for Walmart. Never underestimate Amazon or Walmart.

Ken Morris
Ken Morris
4 years ago

While e-commerce should remain a focus, the fact is that Walmart is generally playing “catch-up” with Amazon by reacting to their moves in the marketplace. Walmart should continue to focus on its online and in-store grocery business as that is a core strength for the company and leverages its current strong customer base. Walmart has the advantage of numerous physical locations across the country (90% of the population lives within a 10 mile radius of a Walmart store) and should be looking for ways to enhance its current customers’ online and in-store experiences by leveraging stores as distribution centers to encourage brand loyalty.

Ricardo Belmar
Ricardo Belmar
4 years ago

A few thoughts immediately occur to me upon reading this article. First, deciding to focus on grocery sales online vs everything else is not a customer-first decision, but rather a convenient accounting decision (how 20th century retail of them!) and a channel-focused one at that. Second, there is a lack of perspective — even a $1B loss (though nothing to sneeze at!) is a blip in terms of overall Walmart profits. Third, looking at e-commerce sales as your one-and-only metric of success is again a channel-centric view vs a customer-centric view of your retail business.

We have witnessed over the past year plus what to those of us on the outside looking in appeared to be a completely different approach to retail by Walmart starting with those digital-native acquisitions, to Store No 8, to AI-led experimental stores in the northeast and Canada, to BOPIS improvements, and mobile app developments. Now, we see what appears to be 20th century retail business thinking manifesting itself and creating self-doubt about the overall strategy. All within a year!
It’s tough to let in-depth retail strategies like these — at scale — play out in a year or less. Walmart needs to consider this an investment, not in the e-commerce channel, but in serving its customers better than others. It’s not a race against Amazon but a race to satisfy their existing customers and to bring in new customers.

At some level, they must realize that their everyday low price strategy has provided a solid customer base, but one that doesn’t have much room to grow. Finding new customers outside that base will require experimenting, and investing in new services, new channels, new everything — until they find the right mix. This is true for ALL retailers, but Walmart is uniquely positioned in that they have the ability to absorb the costs for this exploration until they learn how to get it right! Now isn’t the time to slow down!

Cate Trotter
Cate Trotter
4 years ago

The comparisons with Amazon are always difficult because Amazon isn’t in the same business as Walmart — not really. Amazon makes its money from its web services business, not its retailing. It loses money from retail, even with customers paying into Prime. It’s not difficult to understand then why someone like Walmart might also be losing money when trying to compete with it. The question is whether it really needs to? (Directly compete that is).

Customers go back to Amazon again and again for convenience over anything else. What Walmart needs to do is focus on how it can give customers what they want — a convenient shopping experience — and then build an ecosystem (of online and offline touchpoints) that serves that. Ecommerce should certainly be part of this, but only if it’s offering something of value to the customer rather than for the sake of “keeping up” with Bezos.