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Will Walmart’s E-Commerce Sales Provide More Impetus to Top Line?

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E-commerce sales

Walmart’s (WMT) efforts to enhance its e-commerce business showed some results in fiscal 2Q17, which ended on July 31, 2016. On a constant currency basis, the company’s global e-commerce sales rose 11.8% in 2Q17, providing some upside to the fall in its growth rate in recent quarters.

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Building online capabilities

Walmart’s e-commerce sales growth in 2Q17 was higher than the 7% growth in 1Q17 but lower than the 16% growth in 2Q16. The rise in e-commerce sales in 2Q17 was a result of enhanced merchandise offerings, expansion of its online grocery facility, and growth in its pickup facility.

Walmart and its peers continue to build their online capabilities to fight intense competition from online retailers such as Amazon (AMZN). Amazon reported a sales growth of 31.1% to $30.3 billion in 2Q16. Walmart’s rival Target (TGT) reported a 16% rise in its comparable digital sales in fiscal 2Q16, which ended on July 30, 2016.

In fiscal 2Q17, Walmart expanded its online grocery pickup to 30 additional markets. With this expansion, the online grocery pickup facility is now available in more than 60 markets and at about 400 locations.

Walmart continues to expand its merchandise assortment. On a year-to-date basis, the company has added close to 7.0 million new products to its online assortment. It currently offers about 15 million SKUs (stock keeping units) on its website.

The company is also enhancing its other digital capabilities. It has completed the rollout of the Walmart Pay payment solution to more than 4,600 Walmart stores nationwide.

Strategic deals

On September 19, 2016, Walmart completed its $3.3 billion acquisition of Jet.com. The company believes that this acquisition will accelerate its online sales growth by leveraging Jet.com’s assets and its focus on Millennials.

In June 2016, Walmart announced its strategic alliance with JD.com (JD), the largest e-commerce company based on revenue in China. Under this deal, Walmart agreed to sell Yihaodian, its e-commerce operation in China, to JD.com in exchange for a ~5% stake in JD.com. Walmart believes the deal will help it extend the reach of its brands by capitalizing the extensive presence of JD.com.

In the next part of this series, we’ll focus on the company’s efforts to improve its profitability.

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