Wednesday, November 22, 2017
Business

Wal-Mart Reports 63 Percent Rise in Online Sales

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Wal-Mart reported a staggering rise in online sales in the first quarter Thursday. But now the question is whether the country's largest retailer can sustain that growth to become a true competitor to the online juggernaut Amazon.

The company said e-commerce sales in the United States had grown 63 percent. That helped lift overall sales 1.4 percent to $117.5 billion.

The numbers are a sign that Wal-Mart is making headway in its fight to be as dominant online as it is across the American landscape.

Wal-Mart's strategy has several parts: expand the number of products available online, better leverage its huge physical warehouses and distribution centers to reach customers quickly across the country, and aggressively pursue deals for online stores. The company announced the acquisition of bulk e-commerce retailer Jet.com in August, part of a plan to offer customers more products through the web.

The earnings results gave only hints of about how much the bump in sales is from the acquisitions of the last year, compared with the other changes the company has made.

Wal-Mart executives said that the "majority" of the company's online growth was organic — meaning not from the companies it had bought — but did not break out specific numbers. And while they were hesitant to declare that such growth was the new normal, they credited an expanded online assortment for helping to lure more repeat customers willing to open their wallets a little wider.

"This is extraordinary growth, and we're pleased with the traction we're generating across our e-commerce offerings," said Brett Biggs, Wal-Mart's executive vice president and chief financial officer.

Comparable-store sales, one measure of growth that looks at stores that have been open for at least a year, rose 1.4 percent. That number includes Wal-Mart's core online business, but not items sold through Jet.

Wal-Mart completed its purchase of Jet for $3.3 billion in September. Smaller digital acquisitions followed, including ModCloth, a women's clothing retailer, and the outdoor apparel site Moosejaw.

The deal for Jet was also widely seen as a play for its founder, Marc Lore, a serial digital entrepreneur who could help fix Wal-Mart's online strategy. Lore was put in charge of running Walmart.com after the acquisition, spearheading the faceoff between the world's largest brick and mortar retailer and its biggest online competitor.

Wal-Mart said it now offers 50 million items through its website, up from 35 million in the last quarter and 10 million from the same time last year.

There is no doubt, though, that the company still has a ways to go before coming close to Amazon in e-commerce. Activity on Amazon, which recorded about $136 billion in annual sales last year, accounts for more than half of all online shopping in the United States.

Wal-Mart provides a growth figure only for its online business, and does not specify revenue.

"I think it's fair to say that Wal-Mart is coming from behind online," said Neil Saunders, managing director of the research firm GlobalData Retail. "It has underperformed in that area, so what we're seeing now is really a catch-up to where it needs to be in order to more seriously compete with the likes of Amazon."

But Wal-Mart is also trying to improve its physical stores. Bruised by complaints of empty shelves and poor customer service, Wal-Mart pledged to invest in training its in-store associates and revamping its grocery business with services like allowing customers to buy items online and pick them up in a store.

It has also cut back on labor costs. Customers at many stores can now make purchases through self-checkouts.

The company has begun testing drones to handle inventory at its labyrinthine warehouses. In March, the company received a patent for a process in which drones would transport products between departments in stores.

Shares of Wal-Mart stock were up more than 2 percent in midday trading Thursday.

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