NYT
Business Day
Walmart, Lagging in Online Sales, Is Strengthening E-Commerce
By HIROKO TABUCHIJUNE 5, 2015
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A Walmart employee at the retailer’s Pickup-Grocery test store, where customers can collect an online order without having to leave their cars. Credit Rick Wilking/Reuters
FAYETTEVILLE, Ark. — In the world of brick and mortar, Walmart is a titan, ringing up more than $1 billion of sales a day.
But in the online world, the retailer’s business, while growing, remains far behind Amazon. With less than one-sixth the online sales of Amazon, Walmart has been repeatedly outgunned and outsmarted by Amazon’s price-matching, robot-utilizing, competition-crushing machine.
And now that sluggish sales are persisting at its supercenters, and with consumers spending more and more time shopping online, Walmart’s need to play catch-up in its online business loomed large at its annual shareholder conference on Friday. Doug McMillon vowed to tackle that quandary as part of the changes he outlined as the company’s relatively new chief executive.
Walmart’s board also voted on some changes on Friday, by electing only the third chairman in the company’s history. The post again went to a member of the founding Walton family, Greg Penner, 45, who will replace Rob Walton, son of Walmart’s founder, Sam Walton, and chairman for the past 23 years. Mr. Penner is Rob Walton’s son-in-law.
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The customer sign-in kiosks at Walmart’s new test store, which offers service similar to a drive-through. Credit Walmart
“One customer can shop with us in so many different ways — in stores, on their phones, at home,” Mr. McMillon told 14,000 shareholders and Walmart workers gathered at an arena outside the retailer’s Bentonville headquarters. “We’ll win one customer at a time.”
As part of its effort to become competitive on the web, Walmart has made a flurry of tech hires, committed to a billion-dollar war chest and announced a delivery program to challenge the king of online orders, Amazon Prime.
Walmart is set to start sending invitations this week to a pilot program called Shipping Pass, which offers unlimited, free three-day shipping from its online store for $50 a year.
Shipping Pass is a direct challenge to Amazon Prime, which charges shoppers a $99 annual fee for unlimited, free two-day shipping. It is also a desperate bid by Walmart, analysts say: The retailer is unlikely to make money on such a cut-rate offer.
Walmart, however, needs to make up for lost time online, said Burt P. Flickinger III, managing director of the Strategic Resource Group, a New York-based retail consulting firm.
“Walmart.com has been severely mismanaged,” Mr. Flickinger said. “Walmart would go a few years and invest strategically and significantly in e-commerce, then other years it wouldn’t,” he said. “Meanwhile, Amazon is making moves in e-commerce that’s put Walmart so far behind that it might not be able to catch up for 10 more years, if ever.”
Looking up at the leader is an unfamiliar perch for Walmart, which for decades had dominated retailing with a vast supplier network, stripped-down supercenters and rock-bottom prices. Before Amazon, Walmart was the retailer that undercut everyone else with impossible-to-beat prices and hefty scale, muscling them out of business.
But despite declaring a decade and a half ago — in 1999 — that Walmart.com was a priority for the company, the retailer has failed to translate its dominance in stores to online shopping. For years, it has struggled to figure out how to best deliver fresh food and groceries.
It hired Jeanne P. Jackson, an e-commerce pioneer and former chief executive of Banana Republic and head of online operations at Gap, to overhaul its online presence. But Walmart’s then-notoriously insular, and by some accounts, male-dominated culture, drove Ms. Jackson away in less than two years. Gradually, market anticipation that Walmart would become a viable competitor to Amazon dissipated.
In the meantime, Amazon beat one rival after another, dropping prices by double-digit percentages to undercut newcomers and swiftly driving them out of the market.
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Some of the 14,000 Walmart shareholders and employees who gathered Friday for the company’s annual meeting, where Greg Penner was named chairman. Credit Danny Johnston/Associated Press
Mr. McMillon, a Walmart veteran who took the helm at the retailer last year, wants to again put e-commerce front and center, pledging to invest $1 billion in its online operations this year. Under Mr. McMillon, Walmart has expanded the number of products sold on Walmart.com to seven million from one million just three years ago. That number is set to rise to 10 million by the end of the year, though that is a fraction of the estimated 300 million items for sale on Amazon.
This spring, Walmart opened four new centers dedicated to filling online orders, each the size of 20 football fields. Its e-commerce team, based in San Bruno, Calif., a Silicon Valley suburb, has grown to 2,500 staff members from just 500 employees four years ago, and the retailer’s technology employees now engage in hackathons, alongside product and merchandising meetings.
In the last fiscal year, Walmart’s global e-commerce sales rose by 22 percent from the previous year to $12.2 billion. In the United States, Walmart is now the third-largest Internet retailer after Amazon and Apple, according to a ranking compiled by JPMorgan Chase.
“We’ve built a tech company inside the world’s largest retailer,” said Neil M. Ashe, who heads Walmart’s e-commerce business.
Amazon is hardly Walmart’s only online rival. Walmart’s traditional competitors, including Costco and Target, are quickly increasing their online sales. And the upstart Jet.com has raised more than $200 million to create a nationwide e-commerce business that offers the absolute lowest price on consumer products with a system that drives costs down by shipping from nearby retailers, and by allowing shoppers to save by combining orders or waiving returns.
But Mr. Ashe, who previously led CBS Interactive, said that Walmart’s strength lay in the many ways it could link its large physical footprint with its online business to offer customers a whole spectrum of ways to shop.
“Even the same customer doesn’t want the same thing every time,” Mr. Ashe said. “And only we can provide that unique combination of deliver it to your home when you want, pick up at our stores and the stores themselves. That unique combination is where we think the world is going, and where we think we are the only ones that can provide that.”
One new example of a way Walmart is blending a brick-and-mortar environment with its online offerings is its pilot Walmart Pickup-Grocery, a center that resembles a gasoline stand just a stone’s throw away from the company’s headquarters.
Here, shoppers sign in at a digital kiosk, park their cars and pick up the items that they ordered on Walmart.com. During a recent visit, a sport utility vehicle pulled up to the kiosk, then into one of the parking spots and was met within minutes by a Walmart employee who wheeled out an order of groceries in a trolley and loaded the purchase into the vehicle.
Walmart still has just one stand-alone pickup station in the United States, but has four other pilot markets where online orders can be picked up at regular stores. It is also testing home delivery in some areas. But it stresses that these are trials and has not announced plans for a nationwide introduction.
Walmart’s overseas subsidiaries are also ramping up their e-commerce business, in some cases surging ahead of American stores. The pickup station, for example, is an adaptation of an idea already in place at Walmart’s subsidiary in Britain, Asda. In China, delivery workers on scooters ferry 22-pound bags of rice to customers.
“It’s exciting,” Mr. Ashe, the e-commerce chief, said following the shareholders’ meeting. “We can serve you literally in ways no other retailer can."
The Economist
Shopping in America
Between Bentonville and Bezos
Lessons from the two giants of American retailing
Jun 4th 2016 | From the print edition
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FOR decades a titan has towered over America’s shopping landscape. Walmart is not just the world’s biggest retailer but the biggest private employer and, by sales, the biggest company. Last year its tills rang up takings of $482 billion, about twice Apple’s revenue. But now the beast of Bentonville must cope with an unfamiliar sensation. After ruling as the undisputed disrupter of American retailing, Walmart finds itself being disrupted.
The source of the commotion is online shopping, specifically online shopping at Amazon. E-commerce accounted for $1 in every $10 that American shoppers spent last year, up by 15% from 2014. Amazon’s North American sales grew at about twice that rate. Walmart’s share of America’s retail sales, which stands at 10.6%, is still more than twice Amazon’s, but it peaked in 2009 at nearly 12%. In January Walmart said it would close 154 American stores. It may need to shut more.
Walmart’s “supercentres” once offered an unmatched combination of squeezed prices and expansive choice, but this formula is losing its magic (see article). Discounters and other competitors are rivalling Walmart’s low prices at the same time as Amazon’s warehouses can beat its range.
Amazon is also offering something different. Whereas Walmart has strived to help Americans save money, Amazon is obsessed with helping them save time. Amazon has become a new kind of big-box retailer, with warehouses placed strategically around America to speed deliveries to customers. Innovations such as Dash, which lets you press a button in your kitchen to order soap or coffee, could turn Amazon from an online store into something like a utility.
Walmart is fighting back. It is spending billions in the hope of growing even larger. It is offering more goods to more customers, in stores and online. With its legendary attention to detail, it is making its operations even more efficient. For instance, it will save more than 35 truckloads of buttercream icing this year, after spotting that its bakers were leaving too much icing in the bottom of their tubs. By using 27 different boxes rather than 12 to deliver online goods, the firm reckons it can save 7.2m cubic feet of cardboard boxes a year.
Last month sunny results sent up its share price by 10%. Yet far from offering comfort to other retailers hoping to knit together physical and online businesses, Walmart’s fightback shows how hard it will be for them to repel Amazon.
Other retailers cannot rival Walmart’s size—still its most potent weapon. Nine out of ten Americans live within ten miles of a store owned by Walmart. That gives it a unique advantage in e-commerce, because it can both ship from its stores and let consumers pick up baskets of goods that they ordered online. Its vast grocery business, which is harder to move online than non-perishable goods, provides further protection. Although investments have squeezed Walmart’s profits, the firm can afford to invest more than any other in information technology.
Space race
For smaller, worse-managed firms selling clothing, shoes and so on, the prognosis is bleaker. Since April 1st shares in some of America’s most famous retailers, including Macy’s, Gap and J.C. Penney, have plunged by more than 25%, in part because of the march of online firms. In the age of Amazon only those that offer better service, greater convenience or an experience that is hard to mimic online will do well. TJX, which offers brand-name goods at a discount, is thriving, because customers prefer hunting for treasures that are physically there in front of them. Customers come to Nike’s shops not just for trainers but for running clubs. Walmart is betting that it has the brawn and the brains to be in this group. However, others have less cause for hope.
NYT
Tech Giants Gobble Start-Ups in an Antitrust Blind Spot
Deal Professor
By STEVEN DAVIDOFF SOLOMON AUG. 16, 2016
Credit Harry Campbell
Walmart’s $3.3 billion acquisition of Jet.com can be expected to sail through antitrust review, eliciting barely a peep of objection from the federal government.
Like Facebook’s acquisition of WhatsApp, the Walmart deal will probably end up being another example of an upstart internet company being swallowed up to preserve the stranglehold of a giant.
This happens because antitrust regulators are stuck in an outdated view of the world, while the internet giants are more attuned to their nascent competitive threats. The deal for Jet.com is just the latest defensive internet acquisition of an emerging start-up that will preserve the hegemony of a select few.
Jet.com was created to take on the dominant force in internet sales, Amazon.com. Although traditional brick-and-mortar retailers like Sears are dying slowly, unable to adapt to the internet, Jet.com — founded by Marc Lore, who sold the parent company of Diapers.com and other sites to Amazon for $545 million — has been different.
Opening for business just about a year ago, Jet.com was able to achieve scale remarkably quickly, reportedly increasing revenue to more than $1 billion, with more than 3.5 million registered shoppers.
Yes, Jet.com has been losing money on every shipment, but remember that Amazon went years without turning a significant profit. Jet.com is still a minnow — Amazon clocks in $100 billion in annual revenue — but it is, as Investor’s Business Daily put it, “one of the few e-tail companies in the U.S. that’s openly challenging Amazon’s dominance.”
And now it is being swallowed up by Walmart.
This could be seen as a victory for competition. Walmart will now have a more dynamic management and brand to buttress its own internet sales operation, which trails Amazon by quite a distance. This will allow it to better compete against Amazon. The likely result is that competition in online retailing will eventually be a slugfest between Amazon and Walmart with everyone else thrown by the wayside.