Suddenly, conservative Walmart management predicts that next year online sales will jump 40%. They are estimated to increase another 40% in fiscal 2019. As a result of this news, shares have spiked to a two-year high. These estimates were announced just a few hours before an investor meeting in Bentonville, Ark. So, these major projections represent the battle cry of Walmart’s management in its latest challenge to upset The Big Gorilla – Amazon.
Marc Lore, the president and CEO of Walmart e-commerce U.S., is an aggressive fighter whose ambition is to beat Amazon with aggressive pricing, two-day free delivery, bigger discounts, and even discounts when you return on-line purchases to the store. I think that those 40% increases are doable, though ambitious. I would prefer that the company beat estimates and deliver sound earnings at the same time.
Right now, I have a feeling that Marc Lore is trying to achieve strong top line growth to catch up with Amazon. And, he’s taking action on several fronts to make that happen. Corporate capital expenditures for fiscal 2018 and fiscal 2019 will hit $11 Billion and management indicated that a lot will be spent on digital growth. Then, there’s his acquisition activity. The recent acquisitions of Bonobos, ModCloth, Moosejaw and Shoes.com present a somewhat questionable strategy, as I am not sure what growth the will contribute. But, they do prevent Amazon from grabbing them and they do strengthen the Walmart e-commerce platform.
Here are some other initiatives also underway by Walmart:
- To facilitate shopping, the company has partnered with Google so that customers can shop by voice on the new Google Express. This will offer faster service and quicker delivery of hundreds of thousands of Walmart products. While Kohl’s, Target and Ulta Beauty have also partnered with Google, they do not make their full assortments available as Walmart will do.
- Next year, voice shopping will be available in all 4,700 domestic Walmart stores as well. According to Lore, the customer experience of voice does not currently exist within a store shopping experience and this will be a differentiator, facilitating the ability to pick up an order in store or use voice shopping for fresh groceries.
- Walmart is developing a pop-up concept that will be tested in early 2018. While it is likely to be hardline oriented, and give the company the flexibility to showcase new products in that segment, it could be hardline products or even a new fashion trend that gets featured. In any case, it directly responds to customer interest in “the thrill of discovery” that has been proven to drive traffic in other stores. It is obvious that loyal frequent shoppers will appreciate the changes that will occur in store.
- We should also ask, what will Andy Dunndo for Walmart? The purchase of Bonobos was a surprise. Yet, I think that the transaction was so important because the CEO of Bonobos, Andy Dunn, is a digital whiz and will add to the savvy of the online management. He is very disciplined and knowledgeable.
- Walmart is about to streamline its return process so that customers can complete the activity quickly. The goal is 30 seconds compared to the five minutes found to be needed earlier this year. It is estimated that 15-30% of online purchases, along with a somewhat smaller percentage of in-store purchases (less than 10%), are returned to stores so the impact and benefit could be significant. And, certain household items will not even have to be returned for credit under this new program.
Walmart had a substantial exposure to the four hurricanes that devastated the South this fall. This will hurt sales in the third quarter, although one can suspect that business will rebound as the November and December sales will be very strong because of planned promotional activity and we should expect to see online sales grow rapidly as management finally confronts Amazon.
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