Walmart ecommerce grew 27% in Q1. Here's what drove it
Fulfillment, third-party sellers and advertising are all expanding.
Fulfillment, third-party sellers and advertising are all expanding.
Walmart’s U.S. ecommerce sales grew 27% year-over-year in the first quarter of 2023, as the retailer sees digital sales growing among high-income consumers flocking to Walmart to save money amid inflation following extensive investments in pickup and delivery.
The ecommerce growth stood out as a high-growth area in the quarterly results from the world’s largest retailer. Overall, Walmart grew US comp sales 7.4% and operating income 17.3%.
On the company’s Q1 earnings call, executives broke down the parts of the ecommerce business where it is seeing growth:
At Walmart, ecommerce sales are connected to the store. The notable ecommerce growth was led by continued double-digit growth in store fulfilled pickup and delivery, said CFO John David Rainey.
“Customers increasingly value convenience and speed of delivery. We have an advantage here as we leverage the proximity of our stores to fulfill and deliver digital orders to customer homes. In many cases, we can get orders delivered faster to customers while building a sustainable omni economic model,” said Rainey.
Walmart is putting an emphasis on growings its ecommerce assortment by adding third-party sellers to its marketplace. Seller counts have increased more than 40%-year-over-year as a result, said Rainey.
Ecommerce isn’t just a digital reflection of a Walmart store.
“We're adding higher profile, in-demand brands that our customers are searching for, but not typically distributed at Walmart, elevating our profile as a digital shopping destination,” Rainey said. The platform is also enabling sellers and suppliers to be more targeted in how they reach consumers, said Walmart US President John Furner.
The seller growth is not only broadening the number of available products in specific vertical categories, but horizontally expands the categories that are available. In particular, there has been strength in food and consumables, as well as acceleration in apparel and home.
It comes after Walmart has made upgrades to the ecommerce experience by enhancing search results and redesigning its website.
“I think that will continue as both the seller count and the item count continue to expand,” Furner said. “So we're really looking at customer channel and driving the business with search to ensure that the customer gets whatever they want when they want it from Walmart.”
Additionally, the number of these sellers using Walmart Fulfillment Services to pack and ship items more than doubled.
Fulfillment is a particularly important part of delivering customer satisfaction, so Walmart has built that into the marketplace expansion, Furner said.
“Customers want to get their delivery when they ordered it,” Furner said. “They don't want it early. They don't want it late. They want it the day-of. And when sellers move their assortment, their inventory, into our fulfillment channels, then it's more certain for a customer that it's going to be next-day delivery or two-day delivery. And that just helps with conversion rates.”
As Furner referenced, the media arm Walmart Connect is also continuing to expand, with growth north of 30% in the first quarter. That included a U.S. sales increase of nearly 40%.
Sam’s Club advertising network, called the Member Access Platform, also grew double-digits, with active advertisers up more than 50% year-overyear.
“Advertisers are responding to our recently-launched in-club sales attribution feature, which provides advertisers with clear insights on the returns of digital ads, both online and in clubs while enhancing member experience,” Rainey said.
For Walmart Connect, the big moment of change was the introduction of a second place auction capability last year. It turned the advertising network into a two-sided marketplace.
“Ultimately, what we're trying to do is connect our sellers, our suppliers to customers, and that can be at the one-to-one level, it can be at the cohort level,” Furner said. “And so the team has done a lot to really increase our capacity and capability to handle those transactions really well.”
In the end, advertising growth is tied to the marketplace expansion. Many of the new advertisers joining the platform are also sellers on the marketplace. In fact, the number of third-party sellers using the retailer’s ad capabilities doubled over the last 12 months, Rainey said.
With more marketplace sellers, advertising to stand out from the crowd becomes more valuable, while the ability to target specific groups of users becomes more useful.
The company’s membership program, called Walmart+, is in a place where the company’s leadership team “likes the trends” it is seeing. That’s because it is building loyalty through ecommerce.
Nearly 50% of Walmart+ members come from the online pickup and delivery channel. Walmart+ members also spend more than other shoppers.
“They shop with us more frequently and the membership deepens engagement, helps enable personalization, and allows us to offer more services and to provide more offers on things that are important to our customers,” Rainey said.
Walmart has yet to release the hard numbers of Walmart+ membership, but said Furner said it is “an important part of the offer.”
“We're encouraged by the growth of new members," Furner said. "And importantly, what we are really ensuring on these new members is that we are helping them see the entire path to get to all the benefits we offer. The core offer, of course, is based in deliveries that are unlimited without cost once you buy into the membership. That's the most important thing that we get right. We measure ourselves really carefully in something we call the perfect order, which is exactly what you ordered on time. And then we continue to work on things like substitutions."
Amid inflation, Walmart is attracting more high-income shoppers that are seeking out the retailer as they seek to save money on groceries. They also tend to be more likely to shop digitally, and Walmart now has expanded pickup and delivery capabilities to offer.
“As we have these new shoppers coming to us, as we have higher income shoppers coming to shop for not only grocery, but general merchandise, we want to retain those," Rainey said. "We want to retain them with better experiences, better product offerings, and we're seeing that in the actions that we're taking today.”
In the end, these pieces of the digital ecosystem don’t operate in isolation. Walmart constructed its ecommerce business so that each service is mutually reinforcing for another. For sellers, they are also integral to success, Furner said.
“If you're a marketplace seller and you want to know how to drive business at Walmart, it's to list on the marketplace, the inventory and fulfillment services,” Furner said. “And then Walmart Connect is just a great way for the seller to be able to find audiences, targeted audiences who are looking for products in categories like the ones they're offered. So it's really the three of those things...that make the customer experience much greater.”
Dealboard has funding and M&A updates from ecommerce aggregators and forecasting software.
This week, the aggregator space is active with M&A, IKEA is ready to roll out newly-purchased warehouse management software and Authentic Brands Group acquired a boot icon. Plus, there’s new investment to report for YouTube influencer Emma Chamberlain’s coffee brand and retail forecasting.
Here’s a look at the latest deals:
Chamberlain Coffee, the consumer brand founded by YouTube influencer Emma Chamberlain, raised $7 million in new funding.
The financing included backing from existing investors including Blazar Capital, Chamberlain and United Talent Agency. New investors include Volition Capital, Electric Feel Ventures, L.A. Libations and Noah Bremen, founder of PLTFRM.
The new funding follows the launch of a Ready-to-Drink (RTD) product and coffee pods. Previously, the brand raised a Series A in August 2022.
"Creating a uniquely inviting coffee brand has been my dream for so long now, and having key investors back us allows us to build Chamberlain Coffee in ways that feel fresh and exciting,” said Chamberlain, in a statement. “There are so many products I am eager to develop and projects I'm excited to get working on. With such an incredible team and group of investors I am more excited than ever to see what the future holds for Chamberlain Coffee."
Impact Analytics, a software company for retail supply chain and merchandise planning, raised new funding from Vistara Growth.
The new investment, the amount of which was not disclosed, comes after Impact raised funding in February 2021 and October 2022 from Argentum.
The funding will help Impact Analytics further develop its Impact Analytics SmartSuite product portfolio, which is designed to help optimize forecasting, merchandising and end-to-end lifecycle pricing. Rather than the traditional forecasting approach of basing decisions on the preceding year, Impact Analytics applies a model that includes 150 variables from internal and external sources, while combining recency and history. Clients include BJ's Wholesale Club, Dick's Sporting Goods, Puma and Tapestry.
Selva Ventures, a venture capital firm focused on consumer brands that promote healthier living, closed its second fund at $34 million, TechCrunch reported.
With the new funding, Selva will invest in brands across categories including health, wellness, beauty and personal care. The fund expects to write checks of $1-2 million in seed and Series A startups, while assisting in areas like finance, operations and retail partnerships.
Backers of the second fund include Unilever Ventures, PagsGroup and Obelysk.
Nautica and Forever 21 owner Authentic Brands Group acquired the intellectual property of Hunter, a 160-year-old British outdoor lifestyle brand known for its Wellington boots.
With the deal, ABG appointed longtime partners Batra Group and Marc Fisher to execute retail and ecommerce operations, as well as continue to expand the brand in the UK and U.S., respectively.
“At the intersection of fashion and outdoor, Hunter introduces another elevated global brand to Authentic’s diverse Lifestyle portfolio,” said Authentic CEO Jamie Salter, in a statement.
Terms of the deal were not disclosed.
The investment arm of IKEA parent Ingka Group acquired the warehouse management software platform Made4Net.
As a result of the deal, Made4Net’s software will be deployed across IKEA’s 482 stores and fulfillment centers. Made4Net will continue to operate as an independent subsidiary of Ingka, with a headquarters in New Jersey. CEO Duff Davidson will remain at the helm of the company.
“Our business currently requires a better fulfillment operations system with more accurate data that better supports handling for our customers,” said Tolga Öncu, head of retail at Ingka Group, in a statement. “Our goal is to become leaders of life at home, serving more people in an omnichannel reality, whenever and however customers choose to meet us.”
European ecommerce aggregator SellerX acquired Elevate Brands, a U.S.-based aggregator.
The combined companies will be known as SellerX Group. It will comprise a portfolio that includes 80 Amazon-native private label consumer brands in categories including sports and outdoors, home, mobile accessories, pets and consumables. The portfolio will span over 40,000 products.
With the deal, SellerX Co-CEOs Philipp Triebel and Malte Horeyseck will lead SellerX Group, while Elevate Brands cofounders Ryan Gnesin, Jeremy Bell and Robert Bell will remain in key leadership positions.
“This acquisition combines our know-how and diversified portfolios of strong brands with a market-leading technology platform and strong operational infrastructure,” said Triebel, in a statement. “By leveraging our combined strengths, I am convinced we are well-positioned to drive further consolidation in the industry.”
Ecommerce aggregator Society Brands acquired Wolf Tactical, a tactical gear company.
Founded in 2017 by Tim Wu, Wolf Tactical makes products including DC belts, range belts to weighted vest and tactical backpacks.
"I started Wolf Tactical by myself as a side hustle with very limited knowledge of business and entrepreneurship. A combination of hard work and relentless learning allowed me to build it into a multi-million-dollar business," said Wu who will remain as brand president, in a statement. "With the help of Society Brands, I have access to untapped potential that I would not be able to achieve by myself.”