Wal-Mart’s CEO calls e-commerce growth too slow
May 19, 2016 04:54 PM
A 7% global e-commerce growth rate for Wal-Mart Stores Inc. is too slow, CEO Doug McMillon told analysts Thursday during the retailer’s fiscal first quarter 2017 earnings call. In a push to boost growth, the retailer is increasing the number of items for sale on its online marketplace and expanding curbside pickup of online grocery orders.
Global e-commerce sales for the retail giant, No. 4 in the Internet Retailer 2016 Top 500 Guide, grew 7% on a currency-adjusted basis in the quarter ended April 29 compared with the same quarter a year ago, the company reported. Wal-Mart did not disclose currency-neutral e-commerce sales.
On an annual basis, Wal-Mart’s e-commerce growth rate has been slowing. E-commerce sales increased 12.3% in fiscal 2016 compared with 21.0% growth during fiscal 2015 and a 30.3% jump in fiscal 2014, according to Top500Guide.com data.
Wal-Mart’s online sales are now growing at a slower pace than the overall U.S. e-commerce market, which increased by 15.1% in the first quarter from a year ago, according to the U.S. Department of Commerce. E-commerce accounted for 11.1% of retail sales when factoring out items not normally bought online. That’s the highest e-commerce penetration in history, according to the figures released Tuesday. Wal-Mart also lags Amazon.com Inc.'s 20.5% sales growth in its latest quarter.
McMillon told analysts, “The U.S. [e-commerce] number is better than the global number but neither is as high as we would like,” according to a Seeking Alpha transcript. He cited Brazil, China and the United Kingdom as key markets where Wal-Mart’s e-commerce and mobile commerce sales are “softer” than he would like. The company did not break out regional e-commerce figures.
“We can see progress against several of the necessary capabilities we need to win in e-commerce, but we're still working on a few others,” McMillon said. “We need them all to come together to see stronger growth. For example, our marketplace is ramping up, but it takes time to build the assortment to the point where customers realize the depth of assortment.”
He said Walmart.com offers more than 10 million SKUs and is increasing that number through a combination of its products and those from other sellers. Wal-Mart announced in April that it is working with ChannelAdvisor Corp., a marketing firm that helps retailers sell on marketplaces like those operated by Amazon and eBay Inc., to rapidly increase the number of merchants in its marketplace program.
While not satisfied with Wal-Mart’s e-commerce growth, McMillon said the retailer’s recent online grocery expansion in the greater Toronto area is a positive trend.
In the United States, grocery pickup service will be in nearly 40 markets by the end of May, up from 22 at the start of the year, he said. “Advances we have made in fulfillment capabilities, including our most recent center in southern California, mean customers can get the items they want fast and at Wal-Mart prices.”
Overall, McMillon said the company is “pleased with our e-commerce operating system and happy to have our new e-commerce fulfillment centers operational.”
Wal-Mart has said it will spend more than $1.1 billion this year on e-commerce.
For fiscal Q1 2017 ended April 29, Wal-Mart also reported:
- Revenue of $115.9 billion, up 1.0% from $114.8billion in the year-ago period. On a constant-currency basis revenue was $119.4 billion, up 4.0% from $114.8 billion.
- U.S. net sales of $73.3 billion, up 4.4% from $70.2 billion.
- International revenue of $28.1 billion, down 7.3% from $30.3 billion.
- Gross merchandise value increased 7.5%. Wal-Mart does not disclose dollar figures for this metric.
- U.S. comparable-store sales for Wal-Mart stores were up 1% compared with 1.1%.
- Net income of $4.23 billion, down 8.8% from $4.64 billion in the same period a year ago.