Executive Briefings

Walmart's E-Commerce Challenge to Amazon Gets a Reality Check

Walmart proved to be the victim of its own success on Tuesday.

The discount retailer’s shares plunged 10 percent (shedding $31bn in market cap) after it unnerved investors by reporting a sharper than expected decline in online sales growth. (Most of that was to be expected as it come a year after its 2016 $3bn acquisition of Jet.com.) Walmart said that online U.S. sales had risen 23 percent during the holiday quarter, a far cry from the 50-percent clip in the preceding quarter and the 63-percent quarterly gain of not that long ago

A good chunk of that underperformance stemmed from operational problems, something that shows just how much more work Walmart has to do if it is to become a true rival to Amazon.com and live up to the narrative Wall Street has bought into after several quarters of outsized online growth.

Walmart CEO Doug McMillon acknowledged that the company had struggled to manage the enormous flow of products like electronics, toys, and gifts into its e-commerce distribution centers at peak times during the holiday season, the abundance of which hurt its ability to get more everyday items in-stock online. These are things Amazon has largely mastered.

“Our basic in-stock e-commerce suffered as a result,” McMillon said on a conference call. “We’re learning how to deal with higher volume.” It’s clear Walmart will have to learn more quickly if it is to reach its projections of getting e-commerce growth up to 40 percent this year as it promised investors.

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The discount retailer’s shares plunged 10 percent (shedding $31bn in market cap) after it unnerved investors by reporting a sharper than expected decline in online sales growth. (Most of that was to be expected as it come a year after its 2016 $3bn acquisition of Jet.com.) Walmart said that online U.S. sales had risen 23 percent during the holiday quarter, a far cry from the 50-percent clip in the preceding quarter and the 63-percent quarterly gain of not that long ago

A good chunk of that underperformance stemmed from operational problems, something that shows just how much more work Walmart has to do if it is to become a true rival to Amazon.com and live up to the narrative Wall Street has bought into after several quarters of outsized online growth.

Walmart CEO Doug McMillon acknowledged that the company had struggled to manage the enormous flow of products like electronics, toys, and gifts into its e-commerce distribution centers at peak times during the holiday season, the abundance of which hurt its ability to get more everyday items in-stock online. These are things Amazon has largely mastered.

“Our basic in-stock e-commerce suffered as a result,” McMillon said on a conference call. “We’re learning how to deal with higher volume.” It’s clear Walmart will have to learn more quickly if it is to reach its projections of getting e-commerce growth up to 40 percent this year as it promised investors.

Read full article