Walmart e-commerce soars during COVID-19 crisis, but online profitability remains a longer-term challenge
By Stuart Lauchlan May 20, 2020
Size isn’t everything. Walmart’s online sales have rocketed during the COVID-19 crisis, but how can the world’s largest retailer translate that into future profitability?
Last year Walmart’s e-commerce strategy came under unwelcome attention as the world’s largest retailer reviewed its entire operation. Flash forward to today and the firm’s digital investment has paid off in spades as the COVID-19 crisis sent shoppers online. Q1 for the Fiscal year 2020 numbers released saw online sales in the US jump 74% for the 3 months to the end of April, taking in a sizeable chunk of lockdown to date. The scale of the surge in business was a challenge to be met, says Walmart CEO Doug McMillon:
It was a big uptick and it took a bit of time for us to get on our feet. I was in an e-commerce fulfillment center in Fort Worth, Texas a few weeks ago. We finished after Christmas with 1,000 associates in that facility and the day that I was there, we had 4,000. So the surge just in throughput is amazing.
As to what’s being bought online, this has gone in stages. The first was the ‘panic buying toilet rolls’ phase, accompanied by a focus on hygiene products and essential groceries. As shelter-in-place orders came into force and people found themselves confined to their homes, spending shifted to home education and entertainment as well as building out the home office. Today there’s a new phenomenon, which McMillon calls “relief spending” which has been influenced by US government stimulus dollars. These aren’t being spent on essentials but on discretionary spending items, such as TVs, video games, and computers.
Question 1.1
1.1 Using relevant examples from the case study assess the underlying strategic trends that had impacted Wal – Mart both before and during the Covid-19 crisis.
Suggested Solution
Walmart is among the American fortune 500 firms and it has been founded in 1962 when the first shop was launched in Rogers, Arkansas (Walmart, n.d.). The company has more than 2.3 million associates throughout the globe and it has recorded favorable profits of US$559 billion for the year ended January 31, 2021 (Walmart, 2021). Looking into the case study we deduce an interesting fact that an increase in sales does not translate into an equivalent increase in profits. Profits are determined by the products which the firm is ………………………………………..
Acquisition and merges
It is evident that prior to covid-19 the giant firm pursued various growth strategies which helped them to improve their image and capacity to deliver. Suttle (2019) posited that acquisition is very crucial to gain a competitive advantage in the market. The mergers displayed in the case are strategic acquisition because it was directed to solve a particular or a series of problems at the same time seizing market opportunities (Frederiksen, 2021) ………………………………………………………………………………………
According to Deloitte (2013) divestments if properly handled can lead increase in shareholder value. Divestment is the process of reducing or scaling down the business by selling off some units or assets which are non-core to the business (Cattlin, 2021). The question, therefore, arises as to how …………………………………
Investment in e-commerce: Digital marketing
Prior to the pandemic, the firm had already started investing in e-commerce, particularly online shopping. Walmart has both brick-and-mortar shops and online shops which helped the firm to attain high profits in the midst of Covid-19. In the case study, it is highlighted………………….
Information and Communication Technology: IOT & Web2.0
The company rides on efficient technology and a group of software developers working in the background to improve the resilience of the firm in the market. Valacich (2018) explained that customers are not comfortable to make payments on every website, a website should be structurally firm to allow reduced debugs, errors, and probability of ransomware ………………………..