After spending billions on its web operations to take on rival Amazon.com Inc., the last thing Wal-Mart Stores Inc. desired to tell investors was that online sales momentum was slowing.
Yet the earth’s biggest retailer said Thursday that e-commerce sales rose only 8 percent in the fourth quarter. That’s down from 10 per cent in the third quarter and 16 per cent within the second.
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The retailer attributed the deceleration to increased competition in the U.K. in addition to economic downturns in Brazil and China. In terms of its domestic e-commerce sales, Wal-Mart would only say that its U.S. online operations have grown faster than the company-wide total. However with the retailer set to invest more than US$1.1 billion this year on e-commerce, investors are getting impatient.
“Their eyes were huge, and also you can’t necessarily blame them for Brazil or the U.K. or China, but they weren’t careful and conservative within their look at what e-commerce was going to do,” said Meredith Adler, an analyst with Barclays Plc. She said Wal-Mart isn’t currently making a profit online and hasn’t indicated if this will.
Meanwhile, Amazon said recently that it is retail sales within the fourth quarter increased 20 percent to US$33 billion. For all retailers, online sales grew 9 percent to US$105 billion within the holiday period, according to the National Retail Federation. Wal-Mart doesn’t disclose the dollar amount of its online sales.
Despite Wal-Mart’s spending, the organization is still falling lacking Amazon on price and selection, said Guru Hariharan, ceo of research firm Boomerang Commerce. Throughout the holidays, Amazon was able to beat Walmart.com in key areas like electronics, toys and housewares, and Target Corp. also sold items for cheaper in certain categories, he said. And Amazon were built with a significantly bigger selection than Walmart.com in every category Boomerang tracked.
“Why would I ever go to Walmart.com and shop there after i have affordable prices on Amazon and a much higher assortment on Amazon?” Hariharan said. “Wal-Mart needs to perform some soul searching and evaluate which it stands for. They aren’t likely to be able to compete on cheapest price and biggest selection anymore with Amazon.”
One area Wal-Mart does have an advantage was groceries, analysts said. The organization has expanded its online grocery shopping to more than 150 locations in at least 20 markets within the U.S., letting customers order online and get at the store without leaving their cars.
“If there’s one piece Walmart knows within the U.S., it’s grocery, so I believe that is really a logical move ahead,” said Robert Drbul, an analyst with Nomura Securities.
But other competitors aren’t far behind. Amazon is testing its own grocery delivery service, which may use drones, and Google might even enter the market with its self-driving cars, Hariharan said.
“Wal-Mart has a five- to 10-year advantage in grocery,” he said. “They really need to double down on that because competing with Amazon in price is turning out to be a bad idea.”
Bloomberg News
