Much of Walmart’s domestic growth over the past decade came from market share gains in the grocery business. Walmart’s grocery sales growth began to slow about four years ago only to be boosted in 2018 by curbside pick-up at Walmart stores. As recently as 2012, management believed the company’s future growth prospects lay in international markets. That year, Walmart allocated 39% of its capital expenditure budget to expansion in international markets. By the end of 2017, the company had pulled back its investments so that international markets only accounted for about 26% of total capital expenditures. Walmart has refocused its efforts on developing a so-called “omnichannel” business and now seems to be signaling that its growth will likely come mainly from e-commerce rather than brick and mortar stores.
Building e-Commerce capabilities captured 45% of the company’s capital budget in 2017. As noted above, the company spent $3.3B on the acquisition of Jet.com in 2016 (not included in cap. expenditures). Similarly, Walmart announced in May 2018 it would pay $16B for 77% of Flipkart – the leading e-commerce retailer in India. For the full year 2018, Walmart allocated over 50% of its $10.4B capital expenditures to e-commerce.
The company recently remodeled a superstore in New Hampshire, adding 20,000 sq. ft. of space in order to be able to use robots for order fulfillment and add drive-through lanes for order pickups. Taking aim squarely at Amazon, Walmart also began offering free two- day shipping on “millions of items” without a membership fee. In this way, management hopes to blend e-Commerce and brick and mortar shopping so as to cover 100% of consumer shopping needs.
Answer these following questions
1. In light of the company’s emphasis on “omnichannel” retailing, how will Walmart’s value proposition to customers need to change (if at all)? How will Walmart’s profit model need to change (if at all)?
2. In your team’s view, will Walmart be able to gain a competitive advantage in e-Commerce? What sources of competitive advantage (if any) does Walmart have that will help it catch up to Amazon? Use strategy concepts to support your position, as well as facts about Walmart, Amazon, Jet.com, and Flipkart.
Limit your answers to 400-500 words, no more than 500 words