4 Lessons from Walmart’s E-commerce Success

With the COVID-19 pandemic, 2020 is the year when companies all over the world began to see e-commerce as a necessity.

This includes Walmart. Starting as brick and mortar shops, Walmart is currently one of the biggest e-commerce retailers in the US. This has helped its 3Q 2020 revenue to increase by 80% despite the effects of the pandemic. 

To Walmart, what is most important is being flexible and adapting to constantly changing consumer preferences and behaviours. 

Lesson 1: Integrating e-commerce with physical stores

Ironically, a key attribute explaining Walmart’s e-commerce success is its physical stores. It is hard to imagine that possessing a network of stores is so crucial to selling products online. Walmart is future-oriented in that way. Almost a decade ago, it already began trying out grocery pickup services. With a vast majority of the US population staying within 15km of a Walmart store, grocery pickup has been extremely convenient and popular for shoppers. 

The popularity of collection services is difficult to explain – who would want to order online from home, and take all the effort to dress up, get on the roads all the way to the physical store just to collect the items? This seems neither here nor there. But one cannot argue against the evidence. In fact, it is not just Walmart that is seeing this phenomenon. In 3Q 2020, Target’s Drive Up sales increased by five times! Door-to-door sales grew three times and in-store order picking increased by half. These services have also helped Target’s e-commerce sales to grow by over 150% in the third quarter of 2020.

Lesson 2: Staying value-oriented

The reason Walmart has become the world’s largest retailer is because it takes full advantage of consumers’ focus on value. Although the means and speed at which the consumer gets the product is important, we must understand that no one will buy it if it is not what the customer wants. This is especially prevalent with the onset of the pandemic, where income levels have fallen across the board, and it’s increasingly difficult for the average American to keep up with rising costs of living. This has made staying value-oriented even more crucial. 

Lesson 3: Don’t be afraid to invest big

E-commerce can be expensive for retailers, convenient as it may be for customers. Walmart’s e-commerce journey was not without challenges. It experienced its first drop in sales in 2015 since 1970. Walmart realised that it had to do more. To promote the growth of e-commerce, Walmart acquired a series of e-commerce businesses between 2016 and 2018, spending billions of USD.

If not for this multi-billion dollar investment, it would be hard to imagine where Walmart’s e-commerce business will be today. Not all of the acquired businesses were successful, but along the way, Walmart benefited from its experience and talent acquired. 

But these were merely acquisitions. Walmart spent millions more on pickup services, express shipping, and mobile apps, just to give users the best experience possible. From the consumer standpoint, seeing Walmart’s technological services run smoothly may be satisfying. But it’s easy to forget the large amount of resources required to provide world-class e-commerce. In fact, Walmart’s e-commerce business made a $ 2 billion loss in 2019.

Lesson 4: Repeated purchases bring up revenue

If you want more sales, you need customers to keep coming back. And for customers to keep returning, you need to sell what is important to them.

Walmart achieves this by selling necessities. Food expenditure is the third largest consumer expenditure in the United States. If a retailer sells groceries, you can expect a steady stream of foot traffic. Today, we think of Walmart as a grocery retailer, but when Walmart opened its first store in the 1960s, it was not selling groceries. The expansion into grocery stores is largely due to Walmart’s becoming the retail giant it is today. 

By selling groceries, Walmart has increased the frequency of visits because most consumers buy groceries every week. On the way to buy groceries, consumers may also see other products they like – be it household products or entertainment products. In fact, millions of customers purchase a television at Costco while shopping for breakfast cereal.