Wal-Mart Stores allowed investors a sigh of relief this week with a Q3 report that beat expectations, but e-commerce is proving to be a soft spot. E-commerce provided 0.15% of Q3 sales growth, below the 0.3% in 2014, even as the retailer has allocated billions of dollars to boost online sales.
The retailer’s rebound is based squarely on its store performance; its e-commerce growth was 10%, slower than previous reports, and well below Amazon’s 23% clip, which could grow to 25%.
The retailer has introduced omnichannel initiatives like in-store pickup, but experts have told Retail Dive that much of its omnichannel efforts might help more to drive sales in brick-and-mortar stores than online.
When it comes to e-commerce, Wal-Mart is in a pickle. Online sales are just 3% of its overall sales, so its efforts to boost e-commerce are at something of a disadvantage from the start.
Its site has an assortment that pales compared to Amazon, which enjoys six times the online sales that Walmart.com does.
The retailer has struggled in a few ways to boost e-commerce. Addressing frustrations from shoppers, the company last year finally agreed to match its own e-commerce prices in its stores.
In many ways, according to Jason Goldberg, VP of commerce at digital marketing firm Razorfish, Wal-Mart’s e-commerce efforts are actually more protective of its brick-and-mortar stores. They’re aimed at sustaining and growing the wallet share of its store customers, in part, perhaps, he says, because of the difficult nature of e-commerce.
“The dirty little secret of e-commerce is, it’s tough to be profitable,” he told Retail Dive earlier this year. “Especially when you add things like free shipping and free returns. When you look at profitability at first parity goods out of brick and mortar, it’s much higher.”
It’s a question of priorities. The retailer has a juggernaut of stores, which traditionally have better margins than e-commerce. E-commerce is a growth area for retail, though, and Wal-Mart will likely have to grow that sector of its business. Unlike many of its rivals, including Target, the retailer has opted not to drop its free shipping minimum for the holidays. While that may ensure some larger orders, it could also discourage orders, especially since free delivery is of utmost importance to online shoppers.