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Wal-Mart invests heavily in e-commerce as web sales grow 17% in Q1

May 19, 2015 01:57 PM
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Wal-Mart Stores Inc. reported today global online sales growth of 17% in its fiscal first quarter compared with the same period last year, and plans for e-commerce investments that could approach $300 million in the current fiscal year. The quarterly growth represented a mild slowdown from the 22% growth Wal-Mart reported for its last fiscal year.

Company executives said Wal-Mart’s e-commerce investments in its first quarter ended May 1 amounted to 2 cents per share. With 3.23 billion shares of its stock outstanding, that equates to nearly $65 million in spending on digital assets in the three-month period. For the full fiscal year, Wal-Mart projected e-commerce investments of between 6 cents and 9 cents a share, or $194 million to $291 million.

The money is going to improved e-commerce sites, mobile apps and new direct-to-consumer fulfillment centers in the 10 countries where Wal-Mart operates retail websites.

“In U.S. we’re rolling out a more simplified checkout process on Walmart.com, which is based on our global technology platform, Pangaea,” Wal-Mart CEO Doug McMillon told investment analysts today. “An important part of this platform is that it delivers a better experience on mobile devices. Mobile is increasingly the driver of our e-commerce business.”

Wal-Mart, No. 3 in the Internet Retailer 2015 Top 500 Guide, did not disclose web sales in dollars for its fiscal 2016 first quarter for its global or U.S. operations. But Greg Foran, president and CEO of Walmart U.S., said e-commerce contributed 20 basis points, or 0.2%, of the 1.1% growth in comparable-store sales for Walmart-branded stores in the United States in the first quarter.

The impact was even bigger for Sam’s Club, Wal-Mart’s warehouse club chain. E-commerce contributed 40 basis points of the 0.4% same-store sales growth, reported Rosalind Brewer, Sam’s Club president and CEO. That means store sales were essentially flat, and all the growth came from the web.

In discussing global e-commerce investments, McMillon said, “We will open two new mechanized fulfillment centers in the U.S., and two others will follow later this year.” He did not go into detail about the kind of mechanization to be deployed at those distribution centers.

Foran, the Walmart U.S. CEO, said traffic from mobile devices was up over 100% in the quarter and that conversion rates improved. He also said Wal-Mart had added another store in the Huntsville, Ala., area to its online grocery sale test. The retailer also has improved its order online, pick up in store program, which Wal-Mart formerly called Ship to Store and recently rebranded Walmart Pickup. “The program includes improved email communication, a new signage package that makes it easier for customers to understand the program, and a focus on a faster pickup experience in the stores. It will roll out to all stores by Oct. 1,” Foran said.

Dave Cheesewright, president and CEO of Wal-Mart International, detailed results and investments outside of the U.S. He said the company plans to launch an improved Sam’s Club e-commerce site in Mexico in the second quarter and a mobile app in the third quarter. “In China, we’ll launch a new app later this quarter for our stores that will enable customers to shop from their local Wal-Mart store and choose to pick up their order in store or have it delivered to home,” he said. “And in Canada, our e-commerce business continues to perform strongly with a comp of greater than 40%.”

The retailer recently announced plans for its second e-commerce fulfillment center in Brazil, McMillon said. Wal-Mart’s online sales increased by a double-digit percentage, and ahead of the Brazilian e-commerce market, Cheesewright said, without getting specific. “Phones, auto and tires, and baby categories helped drive this growth,” he said.

Yihaodian, the Chinese online grocery retailer that is 51% owned by Wal-Mart, booked strong sales of imported items, including milk products and shampoo, Cheesewright said. The e-retailer’s conversion rate improved nearly one-tenth of a percent over the prior-year period and more than 40% of orders came from mobile devices, he said. Yihaodian is No. 7 in the Internet Retailer China 500.

McMillon said he recently visited Shanghai and went along as a Yihaodian employee delivered parcels to Shanghai apartments. “Those customers we delivered to in Shanghai were quick to praise our associate in his service during deliveries,” he said. “They liked our prices but asked for items that we don’t yet carry. I was pleased to hear from them that we didn’t need to open the cases of merchandise because they trusted our delivery associate. That’s a big deal.” In China, consumers often will open a package they receive from an online retailer and even try on the merchandise while the courier waits, then hand back to the delivery person items they don’t like.

For the first quarter of its 2016 fiscal year ended May 1, Wal-Mart reported:

  • Global e-commerce sales increased 17% year over year, but the company did not report web sales in dollars. Internet Retailer estimates Wal-Mart’s global online sales totaled $12.126 billion in 2014 and have been growing at 21% annually over the last five years.
  • Total net sales of $114.002 billion, a decline of 0.1% from $114.167 billion in the same period a year earlier.
  • Net income of $3.283 billion, down 11.9% from 3.726 billion.

 

 

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