Changing Landscape <\/u><\/p>\n
As of Q2 2016, U.S. retail e-commerce sales (seasonally adjusted) experienced 16% year-over-year growth compared to total retail sales which saw 2% year-over-year growth.[i]<\/a> With recent expansion of the e-commerce sector and expectations for sustained growth in the future, Walmart has recognized the importance of adapting its business and organizational model to the digital landscape.<\/p>\n Expansion of E-Commerce Platform<\/u><\/p>\n Walmart has introduced many digital platforms to expand its e-commerce presence including Walmart Labs to manage Walmart\u2019s broad e-commerce platform; a \u201cMarketplace\u201d that allows third-parties to sell merchandise on Walmart.com; \u201cWalmart Pickup,\u201d \u201cPickup Today,\u201d and \u201cOnline Grocery\u201d that makes shopping more accessible and efficient; and 13 dedicated e-commerce fulfillment centers in the U.S.[ii]<\/a> Walmart is committed to adapting to accommodate the changing landscape and in fiscal year 2016, Walmart invested an incremental $296 million (compared to 2015) in e-commerce.[iii]<\/a><\/p>\n Acquisition to Adapt<\/u><\/p>\n However, Walmart\u2019s expertise in brick-and-mortar stores has limited its ability to compete with e-commerce giants such as Amazon. In Q2 2016, Walmart.com grew only 7% which lagged e-commerce competitors.[iv]<\/a> Amazon has superior data analytics and is a more agile and nimble company relative to Walmart.[v]<\/a> In order to compete with Amazon, Walmart recognized that it needed to look externally for support and expertise. In August 2016, Walmart acquired Jet.com for $3.3 billion in the largest purchase of an e-commerce startup in the U.S.[vi]<\/a> Walmart believes that this acquisition will \u201ccomplement the significant foundation already in place to serve customers across the Walmart app, site and stores and position the company for even faster e-commerce growth in the future by expanding customer reach and adding new capabilities.\u201d[vii]<\/a> With the acquisition of Jet.com, Walmart will be able to leverage Jet.com\u2019s e-commerce capabilities including its algorithm for bulk buying as well as its customer base. Additionally, Walmart will benefit from the expertise of the Jet.com executive team including Marc Lore, a serial entrepreneur with immense e-commerce experience who will now run Walmart.com.[viii]<\/a><\/p>\n Future Digital Growth<\/u><\/p>\n As the acquisition of Jet.com is the largest e-commerce startup acquisition in the U.S., it will be interesting to see how the integration of the two companies unfolds. Will Walmart be able to extract significant synergies from Jet.com to provide value to its customers? Will Jet.com make Walmart a more agile company? Will they be cultural complements? Assuming the integration of Walmart and Jet.com is successful, Walmart should continue investing in other companies to improve and expand its e-commerce platform.<\/p>\n Additionally, Walmart currently has 85 million unique visits per month (which will likely increase with the addition of Jet.com\u2019s user base).[ix]<\/a> Walmart should work on using data from its visitors and customers to improve its offerings and increase revenue, perhaps from personalized advertisements or other targeted marketing methods.<\/p>\n Walmart should also consider expanding its fulfillment and distribution centers. Currently, it only has 13 dedicated e-commerce fulfillment centers in the U.S. compared to Amazon that has over 70 million square feet of fulfillment centers, which, if you aggressively assume the average warehouse size to be 1 million square feet, equates to 70 centers.[x]<\/a> Walmart should invest in expanding its fulfillment centers so it can speed up and make the delivery process more efficient. Walmart should investigate last-mile delivery options. Walmart has started discussions with Uber, Lyft, and Deliv for last-mile delivery of grocery products, but Walmart should start focusing on expanding its last-mile delivery options more broadly across all product types.[xi]<\/a> Amazon has recently introduced \u201cAmazon Flex\u201d and \u201cAmazon Prime Now\u201d which allow customers to receive their products in as little as an hour.[xii]<\/a> In order to compete with Amazon\u2019s last-mile delivery products, Walmart must spend significant capital expanding its offerings through the last-mile delivery channel and its relationships with Uber, Lyft, and Deliv. While it will be challenging to compete with e-commerce giant Amazon, it will be critical for Walmart to be innovative and adaptable to remain competitive. \u00a0(799 words)<\/p>\n [i]<\/a> \u201cQuarterly Retail E-Commerce Sales 2nd<\/sup> Quarter 2016.\u201d U.S. Census Bureau, U.S. Department of Commerce, August 16, 2016, Washington, D.C. https:\/\/www.census.gov\/retail\/mrts\/www\/data\/pdf\/ec_current.pdf<\/a><\/p>\n [ii]<\/a> \u201cWalmart 10-K 2015.\u201d January 31, 2016.<\/p>\n [iii]<\/a> \u201cWalmart 10-K 2015.\u201d<\/p>\n [iv]<\/a> Picker, Leslie et al. \u201cWalmart Rewrites its E-Commerce Strategy with $3.3 Billion Deal for Jet.com.\u201d DealBook \u2013 New York Times, August 8, 2016. http:\/\/www.nytimes.com\/2016\/08\/09\/business\/dealbook\/walmart-jet-com.html<\/a><\/p>\n [v]<\/a> \u201cWalmart and Jet.com: The Marriage Won\u2019t be Easy.\u201d Forbes, August 22, 2016. http:\/\/www.forbes.com\/sites\/forbesleadershipforum\/2016\/08\/22\/walmart-and-jet-com-the-marriage-wont-be-easy\/#2c3c3e38353e<\/a><\/p>\n [vi]<\/a> Nassauer, Sarah. \u201cWal-Mart to Aquire Jet.com for $3.3 Billion in Cash, Stock.\u201d Wall Street Journal, August 8, 2016. http:\/\/www.wsj.com\/articles\/wal-mart-to-acquire-jet-com-for-3-3-billion-in-cash-stock-1470659763<\/a><\/p>\n [vii]<\/a> \u201cWalmart Agrees to Acquire Jet.com, One of the Fastest Growing E-Commerce Companies in the U.S.\u201d Walmart News, August 8, 2016. http:\/\/news.walmart.com\/2016\/08\/08\/walmart-agrees-to-acquire-jetcom-one-of-the-fastest-growing-e-commerce-companies-in-the-us<\/a><\/p>\n [viii]<\/a> \u201cWalmart Rewrites its E-Commerce Strategy with $3.3 Billion Deal for Jet.com.\u201d<\/p>\n [ix]<\/a> \u201cWalmart 10-K 2015.\u201d<\/p>\n [x]<\/a> \u201cAmazon 10-K 2015.\u201d December 31, 2015.<\/p>\n [xi]<\/a> Bender, Michael. \u201cPiloting Delivery with Uber, Lyft, and Deliv.\u201d Walmart Blog, June 3, 2016. http:\/\/blog.walmart.com\/business\/20160603\/piloting-delivery-with-uber-lyft-and-deliv<\/a><\/p>\n