Walmart, the world’s largest retailer posted a drastic slowdown in its online growth for the quarter at 23% compared to the 50% it had reported in the previous quarter.
Most of this, CEO Doug McMillon said was “planned and expected.” But a smaller portion of the slowdown was due to “operational challenges,” he said.
Walmart.com ran out of some things during the holiday season. The company stocked up on holiday gifts like toys, TVs and electronics, but this harmed the in-stock levels of some other items that are stocked in warehouses and in demand year-round.
“We’re learning how to deal with higher volumes,” McMillon said.
McMillon has sworn to fix the problem, but while Walmart is still learning how to master online, Amazon is running away with it. Amazon had a record-setting holiday season, and analysts estimate that it took nearly half of all online sales.
Amazon has mastered dealing with high volume at all times of the season and it knows how to anticipate demand. It also doesn’t need to make room for certain items since it has an enormous network of fulfillment centers spread across the US and, increasingly, the globe.
Part of the issue is in Walmart’s focus on cutting costs while trying to grow online market share. Amazon sells some smaller items at a loss to try and foster loyalty from customers. Walmart doesn’t have a loyalty program like Amazon Prime, which keeps customers in the Amazon ecosystem. Walmart instead has to rely on the strength of its offering and low prices to keep customers coming back.
Walmart’s expenses were much higher last year as it instituted programs, like free shipping and mobile returns, to capture more online customers.
It ended the fiscal year with around 40% in online growth, and it’s forecasting similar growth for the next year and it will be doing a high-wire juggling act as it heads into the rest of the year.