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Wal-Mart plans a big expansion of online grocery sales

October 16, 2015 03:10 PM
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Connecting its e-commerce business closer to its stores will be a big priority for Wal-Mart Stores Inc., and online grocery sales will be a big part of that strategy, Wal-Mart’s top executives told Wall Street analysts this week. 

To tie its web business closer to its stores Wal-Mart, No. 3 in the Internet Retailer Top 2015 500 Guide, will roll out its “click-and-collect” service for online grocery shopping to a substantial number of new stores and states, Wal-Mart president and CEO of global e-commerce Neil Ashe told analysts Wednesday at the retailer’s annual investors day conference. Walmart.com also will continue to invest in e-commerce technology and develop better mobile applications that give Walmart.com shoppers more ways to shop online and in stores. 

“We are excelling in pure e-commerce, but what Wal-Mart can do that no one else can do is marry e-commerce with our existing assets to deliver a seamless shopping experience at scale,” Ashe told analysts. “We're layering new digital capabilities over the store experience to make shopping faster and easier. Wal-Mart has always given customers low prices and now we're also giving them the gift of time.” 

A big new initiative is expanding its program that allows consumers to shop online for groceries on Walmart.com and then schedule a pick-up time at a nearby Wal-Mart store. An employee delivers the food to a consumer’s car when she arrives. In September Wal-Mart expanded its pickup service for online grocery orders to stores in Atlanta, Salt Lake City and six other U.S. cities. Wal-Mart previously offered the service in five markets as a test that began in 2011. By the end of year Wal-Mart will have expanded its web grocery shopping initiative to about 20 states. 

“We are offering online grocery shopping with free pickup to customers in eight new markets ranging from big places like Atlanta to smaller ones like Ogden, Utah, and that is in addition to the five where we are already operating,” Ashe told analysts. “Soon we bring this service to customers in 10 markets, including Dallas and Houston, Miami, and in Tampa and that will put us in 20 markets this year.” 

Wal-Mart will further expand its pickup service for online grocery orders early in 2016, Ashe said, though he didn’t say where. “Early next year you are going to see another wave of 20 more and we will keep on going from there,” Ashe told analysts. Wal-Mart sees online grocery shopping as a key way to reach new shoppers, the retailer says. 

Wal-Mart shoppers that buy both online and in stores spend more than others, CEO Doug McMillon said in his presentation. “Our best customer shops with us not only in stores but also online, and they spend more, shop more frequently and give us a higher share of their wallet,” McMillon told analysts. 

The average shopper who only buys in a Wal-Mart store spends nearly $1,400 a year, compared with someone who only shops at Walmart.com spending about $200 a year, the retailer says. But a customer who shops stores and online spends significantly more, McMillon told analysts. “The customer who shops us through multiple channels spends more than $2,500,” he said. 

Wal-Mart developed its pickup service for online grocery orders, also known in Europe as click and collect, through Asda, its grocery chain business in the United Kingdom. With its expertise in supply chain logistics, many suppliers worldwide and years of learning how to manage a click-and-collect service effectively, Wal-Mart now has a competitive edge over rivals, Ashe told analysts. “Online retail is hard, grocery retail is really hard, so online grocery is of course really, really hard,” Ashe said. “We are uniquely positioned in this space, we've 15 years of experience from the U.K. and experience now over the last couple in the U.S.,” he said. “We know how to execute this and we have got the physical footprint to make it work.” 

Wal-Mart also will continue to develop its mobile commerce capability. Today more than 24 million users have downloaded Walmart’s apps for iPhones, iPads and Android devices and use the app at least once per month, the retailer says. “The Wal-Mart app solves problems because a customer wants to refill her prescription, but needs to get out of the store quickly so she can save herself time by simply taking a picture of the label,” Ashe told analysts. “She also can pull up the mobile registry and see what to get her friend next weekend for the baby shower and when it's time to check out, she can get an e-receipt right on her phone.” 

Wal-Mart will continue to invest heavily in e-commerce and will spend nearly $2 billion on e-commerce technology and infrastructure improvements over the next two years, including $900 million in 2016 and $1.1 billion in 2017, the company says. 

Ultimately Wal-Mart says its omnichannel approach to retailing and more effectively using its base as the world’s biggest store merchant will help the company to compete more effectively online. “Today we are seeing e-commerce companies test stores and it is because they see the same customer desire that we see,” McMillon told analysts. “Here is a key question: Will it be easier for an e-commerce company to build out a massive store network and create a customer service culture at scale, or are we better able to add digital and supply-chain capabilities and leverage our existing stores? We like our chances.”

 

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