Or, at a minimum, a “winner take most” market.Īmazon is a very real existential threat to Walmart’s entire future if the retailer does not significantly close this gap - and fast. This is the reality Lore is still struggling to get Walmart’s entire executive team and board to accept, though sources say McMillon also acknowledges it: E-commerce in the US is becoming a “winner take all” industry. While e-commerce still only represents 5 percent of Walmart’s entire US business, it represents where the industry is moving. Walmart, on the other hand, accounts for just 4.7 percent, up from 2.6 percent three years ago. Wilking/Getty ImagesĪmazon now accounts for nearly 38 percent of online retail in the US, up from 32 percent in 2016, according to an estimate from eMarketer. Walmart CEO Doug McMillon delivers his keynote during the annual shareholders meeting event on June 1, 2018, in Fayetteville, Arkansas. While this strained dynamic inside Walmart is not unheard of for a well-established company attempting to navigate big, technological disruption, the stakes are huge and the company cannot afford the delays that typically result from infighting. To make matters worse, the executive team that leads Walmart’s core business in the US - physical stores - is increasingly frustrated by some of the money-losing initiatives, and sources say its leader is perturbed by the credit Lore’s division gets in the media and on Wall Street for the success of Walmart’s growing online grocery business. So they are increasing pressure on Lore and his online business to cut losses, multiple sources told Recode, which will likely result in selling off at least one online fashion brand, ModCloth, which it purchased just a few years ago. That size loss is an eye-popping figure for a company that is used to printing cash and that prides itself on its profitable operations the overall Walmart business brought in nearly $7 billion in profits during the last fiscal year.Īnd CEO Doug McMillion and Walmart’s board of directors are not happy about it. Walmart does not disclose these figures publicly and declined to comment. Multiple sources tell Recode that the company is projecting losses of more than $1 billion for its US e-commerce division this year, on revenue of between $21 billion and $22 billion. Walmart is, by most measures, in a more competitive position than it was before it acquired Jet.īut it’s still far behind Amazon, and inside Walmart, tensions are rising. The company’s US online sales increased 40 percent last year, buoyed by a successful expansion of an online grocery business the digital-first brands and digital-first talent it has acquired have breathed new life into its portfolio and it has shed at least part of its reputation for being a digital dinosaur. Nearly three years later, Walmart’s stock price is up 53 percent, compared to a 38 percent increase for the S&P 500 over the same period of time. And CEO Doug McMillon had become convinced that Jet founder and CEO Marc Lore, who previously founded Diaper s.com and sold it for a fortune to Amazon, was perhaps the only person who could do it. There were no other bidders for Jet back then, but Walmart was desperate to close the huge gap between itself and Amazon, the online shopping wrecking ball. The country’s most dominant brick-and-mortar retailer agreed to the largest-ever acquisition of an e-commerce company: a $3.3 billion purchase of a fast-growing but money-sucking online shopping site called Jet.com. In September 2016, Walmart made a giant, risky bet.
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