Wal-Mart ups ante on e-commerce

The nation's largest retailer expects e-commerce to fuel its next wave of growth as it more directly competes with Amazon and Google.

By TheStreet Staff May 2, 2013 5:03PM

thestreet logoWoman with laptop © Mike Watson Images/CorbisBy Laurie Kulikowski, TheStreet


Wal-Mart Stores (WMT) is betting that online sales will fuel the next wave of significant growth for the world's largest retailer as it more directly competes against Amazon (AMZN) and Google (GOOG).


"E-commerce is the next growth engine for Wal-Mart," Neil Ashe, president and CEO of Walmart's global e-commerce division, said May 1 at a New York investor conference. "We view this as an opportunity for us to grow pretty dramatically." 

Emphasizing the company's plans to grow its digital sales, Ashe spoke at Barclays' Retail and Consumer Discretionary Conference in New York.


Wal-Mart is scheduled to announce its fiscal first-quarter earnings on May 16. Shares gained 1.4% to close at $46.40 to extend their advance this year to 33%.


"Our opportunity is not to become a multichannel commerce, but rather to be that company that satisfies the customer when, where and how she wants to be served," Ashe said. "The path we were on wasn't going to get us there."


Ashe was hired in January 2012 by the Bentonville, Ark., company to run the giant retailer's online strategy, which includes both the U.S. and international operations. Ashe was previously president of CBS (CBS) Interactive. He was  CEO of CNET Networks and led the sale of the company when it was acquired by CBS in 2008.

'A Lego business' 

Wal-Mart has forecast $9 billion in global e-commerce sales for its current 2014 fiscal year. (Previously, the company didn't break out online sales.) The company's overall revenue for its fiscal 2013 year, which ended in January was just under $470 billion. 

The global retailer trails online giant Amazon.com. Wal-Mart is allocating significant resources and investment to its global technology platform, which includes online fulfillment centers as well as the ability to scale the services in all of its markets.


"The business model for e-commerce -- the financial model will be faster growth, slightly lower margins and obviously lower investment, but that doesn't mean no investment," Ashe said.


"Retail is a Lego business," he said. "The capital is about new units and new units drive growth. We don't need new units, but we do need a constant investment in technology."


Wal-Mart's efforts to build out its e-commerce platform include the acquisition of small Internet specialty companies and expanding markets such as China and Brazil. Walmart owns a majority stake in Chinese Internet retailer Yihaodian.


Wal-Mart is about to roll out a new homepage for Walmart.com. Changes to the homepage include more prominent functions such as search, what's trending and where to find the nearest store, Ashe noted.

A better customer 

Since half of Wal-Mart customers own smartphones, it also means using so-called big data, social media sites Facebook (FB), Twitter and Pinterest and mobile platforms to figure out consumers' interests, which will be reflected in merchandise assortment, Ashe said.


Wal-Mart's focus on its e-commerce strategy not only allows the retailer to reach customers who don't have stores nearby, but, more importantly, the online customer is a "significantly better" customer than one that only shops at a store. 

"We're seeing significant growth in customers that don't shop currently at our stores," Ashe said.


Another service that Wal-Mart is experimenting with is the ship-to-store phenomenon at select stores, in which customers can place an order online, but make the actual purchase in-store. Ashe said this method works particularly well for the customer who prefers to pay in cash and avoid shipping charges. And of course, it gets the customer into the store.


Other retailers are also experimenting with merging online with brick-and-mortar stores, Gap (GPS) announced last month at its annual investor day that it was expanding its offerings to include "ship-from-store, find-in-store and reserve-in-store."


Wal-Mart changed its store sales policies to allow for revenue credit of e-commerce sales in a store's geographic trading area, which has already had a sizable impact, Ashe said.


 More from TheStreet.com


May 3, 2013 1:27PM
You might look at your timeline for the second part of the article as Walmart's ability to pay with cash in store after ordering online has been going on for a year now. While not "new" news, it is still an innovation they are happy to promote
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