Walmart ecommerce grew 27% in Q1. Here's what drove it

Pickup and delivery

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.

Marketplace

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.”

Advertising

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.

Walmart+

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."

Higher income shoppers pick digital

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.”

Bringing it all together

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.”