Wal-Mart’s Need for E-commerce

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In a recent Wall Street Journal article, “Wal-Mart’s E-Stumble”, Amazon was confirmed as the leader in online sales due to its large U.S. warehouse network, but Wal-Mart is trying to find ways to compete. Although Wal-Mart is not only building its warehouse network and looking at other opportunities to lower logistics and distribution costs, Amazon posted web sales of $61 billion, compared to an estimated $7.7 billion for Wal-Mart. It was stated by former Wal-Mart executives that Wal-Mart was late to the e-commerce game. By taking this “wait and see” approach into the e-commerce business, Wal-Mart lost valuable market share to its competitors that it has not been able to regain. As more consumers purchase items via the internet it will be even more necessary for management to be creative in finding new ways to pick-up customer business.

In an attempt to compete in e-commerce Wal-Mart will either ship from warehouses, have workers package products and send from individual store locations or even in certain store locations set up in-store lockers for e-commerce customers to pick-up items. Wal-Mart may be able to take advantage of same day delivery for grocery items that other companies started to try and promote. Currently the store isn’t set up for same day delivery of fruits and vegetables, but stores like Amazon have started to build there infrastructure for shipping same day perishable items. Recent acquisitions by Wal-Mart, including the company’s purchase of Chinese online retailer Yihaodian, have helped to increased this years fiscal global e-commerce earnings. I believe that it will take more of these acquisitions for in order to increase at the pace to pick up market share. This could be in the form of warehousing, logistics or even software.

I find it strange that a company as large as Wal-Mart has not been able to be more competitive in e-commerce and that management took a backseat early on in this quickly growing market. Not only in the U.S. but in markets like China you are seeing huge e-commerce business by companies such as Costco and Macy’s. These companies have found that this can be a way to limit risk and costs by not needing to have stores, but just have warehouses in low rent areas. Using the vast supply chains of these companies will continue to push them to increase their e-commerce sales.

Over the past few years I have used e-commerce for its convenience and ease of searching for products. In terms of groceries I still like to go to the store in-person to make my choices, but for pretty much anything else, I’ll shop via e-commerce. From the articles I’ve read and people I’ve spoke with it appears that this is the trend in the marketplace.

Do you think it’s necessary for Wal-Mart to increase its e-commerce market share in order to excel? Do you expect that the current ideas Wal-Mart has to increase e-commerce sales will work or are there other ideas that would work better for Wal-Mart’s business model?

 

http://online.wsj.com/article/SB10001424127887323566804578553301017702818.html?mod=WSJ_hps_LEFTTopStories

http://www.forbes.com/sites/clareoconnor/2013/04/23/wal-mart-vs-amazon-worlds-biggest-e-commerce-battle-could-boil-down-to-vegetables/

5 thoughts on “Wal-Mart’s Need for E-commerce

  1. I found your post very interesting because just two days ago I was looking to purchase a birthday gift for my niece and was shopping for the item online. My first stop was Amazon, but on my Google page I saw that the item was also available at Wal-Mart. When I looked further into it, I realized that Wal-Mart sold the same item for $15 less compared to Amazon and I ended up buying my gift on Wal-Mart’s online website. It is very important for Wal-Mart to increase its e-commerce market because; 10 years from now, most of the items will be bought online rather than in store. With lower shipping costs, lower taxes and the added convenience of shopping from your room, customers are already starting to do more and more shopping online. Apart from improving the logistics around shipping products, Wal-Mart should also try to increase their overall sales by offering some promotions and special membership discounts. Like Amazon Prime and Amazon Mom, Wal-Mart needs to come up with their own special deals. The low prices on a wide range of products combined with these new promotions will definitely help Wal-Mart increase its overall online sales.

  2. Justin, I think this is a very timely topic. Wal-Mart has received a great deal of negative press lately due to their struggles with staffing and keeping items in stock on the shelf. E-commerce is certainly growing in popularity and no one wants to get left behind, but I feel like Wal-Mart needs to get its house in order before spending too much energy on breaking into a new market. If they are already having issues keeping up with stocking, it would take a great deal of additional manpower to start packaging and shipping items out from their individual stores. Also, Wal-Mart is often most popular in rural areas where ideas like crowdsourced delivery and in-store lockers to pick up orders will have limited appeal and effectiveness. I definitely won’t count Wal-Mart out of the e-commerce war but I’m not confident that they’ve come up with the game changing idea yet.

  3. Wal-Mart has been successful because they are operational excellent. Their supply chain and partnerships have made Wal-Mart the king of retail. In order for Wal-Mart to grow and maintain their leadership position they need to defend and innovate. E-commerce and in store experience are two opportunities for Wal-Mart. From an e-commerce perspective they need to leverage their existing strengths in the supply chain. Their store can compliment the online experience and offer something Amazon doesn’t offer.

  4. I agree with Colleen. Although diving into the E-commerce market seems like a no-brainer for a company like Wal-Mart, that doesn’t necessarily mean it will be profitable for them in the long run. Wal-Mart does have a very efficient supply chain, but its built to support brick-and-morter stores as well as the type of customers that frequent them. It would be a mistake for the executive team to just assume they can translate this success into E-commerce business as well based on current infrastructure. The market is extremely competitive and when you have a monster like Amazon out there, it’s critical to weigh the pros and cons of trying to compete in that way. I think they need to take it a step further and not settle for being a “me too” company.

  5. Justin, Amazon has a name and a reputation for e-commerce that I believe will be hard for Wal-Mart to match. It is not just about technology or how much money you put into a business or business idea and just because Wal-Mart is the giant that it is does not mean that it will beat Amazon that easily.
    I myself associate Wal-Mart with cheap, bad but necessary and not a great experience amongst other things and it may be that other people see it the same way. Now if I need to buy something that I expect to spend very little and do not care a lot about quality, need it right away and cannot wait for it to arrive over mail, I think first of Wal-Mart. If I think then about something of quality, I am looking for the best price, something of relative quality and that I can wait, I go online and buy it from Amazon.
    Basically, my brain is trained for doing so and Amazon benefits from getting into the e-commerce very early on and for pretty much defining it. When I think e-commerce, I think Amazon.
    I do not think Wal-Mart will be able surpass or even compete at the same level as Amazon does unless Wal-Mart comes up with some unforeseen innovation and novelty that would attract people to its website or unbelievable pricing that would justify the switch in behavior, Amazon will remain the uncontestable leader.

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