Combined with an increase in worker wages and the money it's spending to open new stores, Wal-Mart has seen a similar decline in operating income and earnings per share. The revenue growth from e-commerce just isn't enough to overcome the increased investment in the platform. As McMillan put it, "Growth here is too slow."
Wal-Mart's latest effort is already under attack
The biggest opportunity for Wal-Mart in online sales is groceries. More than half of Wal-Mart's revenue comes from this category, which helped shield the company from the declines other retailers experienced during the first quarter. However, groceries have also been slow to move online.
Wal-Mart is at a huge advantage compared with most smaller operations to win an outsized share of online grocery sales due to its existing e-commerce infrastructure. The company has rolled out online order and pickup, which allows customers to pick up their purchases in the store parking lot, and the offering has had a strong start. The service will operate in nearly 40 markets by the end of the month.
But once again, Amazon is also working hard to take share in the online grocery market. The Prime Now service can deliver consumer staples in less than hour in its current markets. The company reportedly launched new private-label brands for grocery items, and it partnered with Sprouts Farmers Markets in California to run its online order/home delivery business, which portends the opportunity for Amazon to help local grocers compete against Wal-Mart and its deep pockets.
Wal-Mart should be able to make some inroads with online ordering, but Amazon represents a constant threat to both Wal-Mart and smaller grocery stores. This is the one area where Wal-Mart has a significant advantage over the competition as it fights for more digital revenue, so it needs to expand quickly before losing momentum.
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