The novel coronavirus and the resultant social distancing have largely altered consumer spending patterns, as people are mainly focused on shopping for essential items. Further, increased stay-at-home trends to maintain social distance has led to an accelerated shift to online shopping. Well, this is where the e-commerce initiatives of supermarket players come into play and it is impressive to note that Walmart Inc. (WMT - Free Report) stands quite strong in this respect.
The world’s largest retailer saw its U.S. e-commerce sales surge as much as 74% in the first quarter of fiscal 2021, mainly on strength in grocery pickup and delivery, walmart.com and the marketplace. The company notified that it saw an increased shift to online shopping, given the higher stay-at-home trends. Certainly, the company’s long-drawn and concerted efforts to step up its online game paid off well.
Walmart has been focused on bolstering omnichannel operations and ramping up delivery services to meet customers’ needs and stay firm amid the growing competition from Amazon (AMZN - Free Report) . We note that these efforts become all the more relevant in the current scenario where social distancing has taken online shopping to a higher level. To make the most of the paradigm shift and cater well to consumers, Walmart is going all the way with its omnichannel efforts.
Walmart Continues to Sharpen E-Commerce Edge
The company’s latest move in this regard includes its partnership with Shopify (SHOP - Free Report) , which was announced last week. With this partnership, the omnichannel retailer can open its Walmart Marketplace to sellers of Shopify. With Shopify’s inclusion, Walmart intends to strengthen its marketplace with small and medium-sized, U.S.-based businesses with complementary offerings.
Moving on, the company has been particularly stepping up its delivery services, given the burgeoning demand for online grocery. To this end, the company’s Sam’s Club division unveiled the launch of curbside delivery earlier this month. Additionally, Walmart added a feather to its delivery services cap by unveiling Express Delivery during the first quarter of fiscal 2021 at several stores, in order to deliver orders to customers in less than two hours.
As part of its first-quarter earnings release, the company also said that it has improved its delivery and pickup services, launched pickup in China, expanded online grocery capacity in the U.K. and introduced contact-less delivery in Canada, among others. Further, the company expanded its ship-from-store option temporarily to about 2,500 stores and extended curbside pharmacy pickup as well as mail-to-home options in the United States. Walmart also announced a partnership between Uber and Flipkart for the delivery of daily essentials. Such initiatives, together with Walmart’s prior moves to solidify its footing in the e-commerce space, are likely to continue working in its favor.
In earlier developments, Walmart had unveiled the Delivery Unlimited membership option for 1,400 U.S. stores during the third quarter of fiscal 2020. Prior to this, the company joined hands with Point Pickup, Skipcart, AxleHire and Roadie. Also, Walmart's deal with Postmates, contract with DoorDash and acquisition of Parcel highlight its focus on enhancing grocery sales. Further, the company’s Walmart Pickup program enables customers to place orders online and then pick them up at a store for free. Apart from enhancing its delivery game, Walmart’s contracts with Green Dot and Microsoft (MSFT - Free Report) ; and buyouts of ShoeBuy, Moosejaw, Bonobos and ModCloth, among others, underscore its intention to build an impressive digital brand portfolio. Also, the buyout of the 77% stake in Flipkart has been bolstering its e-commerce sales.
Without a doubt, Walmart is doing every bit to strengthen its business and efficiently cater to customers’ growing demand amid the pandemic. While it is making enhancements to its online platform, at the same time, the company is also undertaking measures to ensure the safety of its store customers as well as deliveries. While these raise optimism, we cannot overlook margins. Certainly, investments in pay and benefits, the shift in channel mix toward e-commerce and a decline in the sales of higher-margin discretionary items are likely to keep margins under pressure.
We note that shares of this Zacks Rank #3 (Hold) stock have gained close to 11% in the past three months, almost in line with the industry. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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