The retail industry has been witnessing rapid changes of late due to intense competition and increasing online activity. We note that traditional retailers have been experiencing increasing sales pressure and are finding it hard to keep up its market share amid highly promotional environment. With a digital transformation in shopping and consumers preferring to buy online, store and mall traffic has been impacted adversely. As a result, many retailers are shutting stores and focusing on their online models to compete with e-commerce channels. These firms are also trying to find innovative ways to attract traffic to stores. One such stock is Wal-Mart Stores, Inc. (WMT - Free Report) . The Bentonville, AR-based company enjoys strong growth potential along with compelling fundamentals and has been making efforts to understand the evolving needs of customers and drive traffic in both at stores and online.
Let’s now look into some of the factors that have been aiding the company’s performance and few of the challenges it has been dealing with.
Initiatives to Understand Customer Needs and Boost Sales: The company is striving to understand the evolving needs of customers to regain their confidence, and boost sales. The company’s recent move to consolidate its U.S. operations will simplify its business structure and facilitate communication as well as improve execution. The move will also help the company to reduce its sky-high expenses, which have resulted from higher e-commerce activities and wage hikes. This will further help in increasing efficiency at stores.
Walmart’s international business has also shown improvement in the recently concluded second-quarter fiscal 2018, which has been declining since first-quarter fiscal 2016. Results were driven by improved performance at Walmex and in U.K. In fact, nine out of 11 international markets posted positive comp sales, including in the U.K., and five of these markets grew comps by more than 5%. Walmart continues to believe that its future revenue growth is expected to come from international markets.
Improving Comps Sales Growth at Walmart U.S.: Walmart is seeing positive comps at Walmart U.S. for the last 12 quarters. Traffic has also improved for eleven consecutive quarters, thanks to the company’s efforts to modernize its stores to boost traffic. Traffic also increased due to moderate improvement in consumer spending. Walmart’s efforts to change its stores as per consumers’ demand helped the retailer attract shoppers. In fact, the company continues to expect positive comps year over year at Walmart U.S. in fiscal 2018.
Higher Investment in E-Commerce Category: Walmart is putting a lot of effort and focusing on expanding its online business in order to gain larger market share than Seattle-based Amazon.com Inc. (AMZN - Free Report) , the leader in the online business. Just like Walmart, retailers like Kohl’s Corporation (KSS - Free Report) and Target Corporation (TGT - Free Report) are also focusing on its omni-channel retailing and e-commerce activity.
In this regard, the company continues to make huge investments in e-commerce initiatives, including acquisitions. The company’s acquisition of four e-commerce businesses (Bonobos, ShoeBuy, Moosejaw, ModCloth) since the Jet.com acquisition (in September 2016) is in line with the Walmart’s quest to build an impressive digital brand portfolio to take on Amazon. Recently, the company announced palns to invest in online cosmetics startup Birchbox. If the deal materializes, it will become the fifth e-commerce acquisition, since the buyout of Jet.com. Meanwhile, the company is increasing investment in Mexico and China, where Amazon has a substantial share. Wal-Mart has also launched its own mobile payment system called Walmart Pay that will allow shoppers to pay through its smartphone app.
Walmart is also aggressively trying to get a share of the pie in the online grocery shopping and delivery, which is a booming industry worth $12 billion in the United States. Walmart now operates online grocery delivery service in six markets. The giant retailer also enables customers to order groceries online and collect them from 900 locations. The retail giant has partnered with the ride hailing service provider Uber and Lyft for speedy online grocery deliveries. Walmart has recently unveiled a program wherein it will allow food stamp receivers to order food and groceries online and pick up from any of the five specific stores in the United States. Also, with Easy Reorder on walmart.com, customers can repurchase items by looking into their previous in-store and online purchases records. The company also has a dedicated back-to-school destination on walmart.com which enables customers to shop school supply lists for more than 1 million classrooms across the country.
The company’s free two-day shipping to U.S. shoppers on a minimum order of $35 and that too without a membership fee has also proved to be a success. In April, Walmart introduced a program wherein it offered discounts on online items, only if shoppers pick up their orders from a nearby store. The discount given had an added feature to Walmart’s already existing delivery service called Walmart Pickup, which enables customers to place orders online and then pick them up at a store for free. Pickup is currently available at more than 4,600 stores.
In fact, the company expects to continue to invest aggressively in e-commerce initiatives in fiscal 2018.
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