Retail Channels

For Walmart, ecommerce all comes back to convenience

The retailer said ecommerce is helping to add higher-income consumers, and new business lines.

a hand holding an iPhone.

Walmart launched Text to Shop. (Courtesy of Walmart)

Tech inspires wonder and attracts attention. It helps humans do their jobs better, and makes it easier for consumers to access products instantly.

But for business leaders, there’s a constant need to weigh competing interests. For all of the results that technology can bring, there is also significant investment needed to make that happen. Factor in a competitive environment, and it is all the more important to consider which of those investments will result in a true edge.

So it’s worth asking: How is technology not only adding capabilities, but truly growing a business?

Listening to Walmart’s recent earnings call to recap the quarter ended January 31, it was clear that top executives have considered this question on a scale that is befitting of the world’s largest retailer.

Walmart was born before the rise of the digital economy. The company became a behemoth through brick-and-mortar through the 80s and 90s, and it still derives much of its strength from the big box stores that are in the center of most American towns.

Technology, in the form of ecommerce capabilities, is a newer arrival. In part, executives realized over the last decade that they had to build ecommerce to keep pace with where the retail world is heading. More people are shopping online and having goods delivered, so Walmart must have offerings to match. This only became more of an imperative during the pandemic, when the demand for ecommerce skyrocketed.

As the company introduces new technology, there is also an opportunity to consider what it adds.

Walmart US President John Furner put it succinctly: “We've always been known for price, but…we're also now being known for convenience, and a lot of the things that we're doing are helping our customers live better with the convenience that we're offering.”

At Walmart, there is no shortage of new technology being introduced, and investment driving it.

The company has grown ecommerce into an $80 billion business that represents 13% of Walmart’s global sales. It also connected its digital sales to stores with the goal of creating an omnichannel experience. In the quarter ended Jan. 31, ecommerce grew 8.3%.

It recently upgraded its digital customer experiences with a series of feature rollouts to, and is growing its marketplace. It also launched an ecommerce site for businesses and nonprofits.

It has an advertising business that generated $2.7 billion in the last year, growing nearly 30% year-over-year and 41% in the most recent quarter.

It is increasing pickup offerings, and adding delivery capabilities. Over the last two years, store-fulfilled delivery sales have nearly tripled, and are now at nearly $1 billion a month.

Automation is playing a bigger role in the supply chain. At perishable distribution centers, automation helped increase throughput 50% better than expectations. They're the kind of results that are driving the company to grow.

In the store, a new AI-powered platform using a voice and chat capability is being used by more than 50 million customers.

It is also launching pilots like Text to Shop, drone delivery, a creator marketplace and digital collectibles.

With each of these capabilities in place, Walmart is interested not only in how they are performing on their own, but in how they are connected.

One key to this is the company’s ecommerce marketplace, where consumers shop for goods online.

“Marketplace is perhaps the linchpin of all this because that gives us the ability to sell third-party merchandise as well as first party,” said Walmart CFO John David Rainey. “And just this last quarter, we now have over 400 million SKUs on our marketplace. A significant portion of those actually avail themselves of our fulfillment services as well, which is a great benefit for us. But as we get more assortment on the marketplace, we get more eyeballs coming to our website. That allows more advertisers or makes advertisers want to spend money there, too, with the larger audience.”

Another key nexus is the Walmart+ subscription program provides customers with delivery and access to digital capabilities, as well as streaming media. Executives noted that it's a part of the entire digital ecosystem.

“It’s a way that customers can access an interesting combination of all of our assets from our digital front-end, which is becoming one experience over the last couple of years,” said Furner.

Ecommerce also connects to physical retail. The company has stores within 10 miles of 90% of the population. That’s a huge advantage not only for bringing people in, but delivering goods to them in a cost-effective manner.

“It's becoming more difficult to measure the differences in ecommerce and stores because stores are acting as fulfillment centers at times,” Furner said. “They’re stores primarily, and then they are fulfillment centers. So there are a lot of blurred lines between all these channels. So having an offer that is great for consumers in terms of the behavior they're seeking, which is convenience, and not worrying about incremental delivery fees is working fantastically.”

These capabilities are also helping to attract higher-income consumers. Walmart+ members and people who use ecommerce and delivery tend to be younger and more tech-savvy. It’s a customer base that the company stands to grow. On one hand, it has convenience that they appreciate. On the other hand, the low prices are proving attractive at a time of high prices. Higher-income households accounted for nearly half of the gains the company saw in the U.S. this quarter.

By adding convenience, Walmart is also attracting new customers. Its tech capabilities also present opportunities to grow business lines in advertising and fulfillment. That’s how technology can change a business.

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