Why Walmart’s Digital Business Is Poised to Grow
Digital business remains strong
Much of Walmart’s (WMT) recent growth has been driven by the strong performance of its Digital segment. The company’s e-commerce sales increased 60.0% in fiscal 2Q18, while it registered growth of 63.0% in fiscal 1Q18.
Management expects its e-commerce business to generate sales of $11.5 billion in fiscal 2018. Its e-commerce sales are estimated to rise 40.0% on a YoY (year-over-year) basis in fiscal 2019. Although the company’s digital sales are anticipated to grow at a brisk pace, the rate of growth is expected to decelerate a bit, as the company had also acquired Jet.com in the third quarter of 2016.
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Factors driving Walmart’s e-commerce sales
Walmart has taken numerous steps in a short span to strengthen its Digital segment, which is reflected in its stellar sales. The company rolled out various initiatives to save time and money, which assists consumers looking for convenience and value.
Walmart revamped its delivery mechanism by offering free two-day delivery on orders in excess of $35. The company is also offering store pickup discounts.
Walmart is testing several delivery techniques that include direct delivery to a customer’s refrigerator. The company is testing delivery through Uber and its associates. The company also acquired Parcel to offer same-day deliveries in New York City.
Walmart expanded its online grocery pickup services to more than 1,000 stores and plans to add another 1,000 locations by the end of fiscal 2019. To provide ease of shopping, Walmart introduced order dispensers called pickup towers, and it is on track to add another 100 pickup towers by January 2018.
Walmart announced Mobile Express Returns to speed up the merchandise returns process, and it plans to bring in 2,000 category specialists to improve its merchandising.
Walmart’s consumer-friendly initiatives are expected to drive its Digital business in the coming quarters and position it well to compete against rivals Amazon (AMZN), Target (TGT), and Costco (COST). Both Costco and Target have ramped up their digital initiatives and are focusing on faster delivery mechanisms. Meanwhile, Amazon has acquired Whole Foods.