What's going on?
Take that, Amazon! Amid a weak environment for most retailers, the world’s biggest player, Wal-Mart, reported a huge increase in ecommerce sales!
What does this mean?
About 18 months ago, Wal-Mart began a significant turnaround plan aimed at improving its in-store sales and boosting its online business. It cleaned up its stores and raised its workers’ wages in an effort to improve customer service, which contributed to a 1.4% increase in US store sales over the past year (that might not sound like a lot, but many big-box retailers are currently experiencing declining sales).
At the same time, its online sales surged 63%! Now, that’s a bit misleading, because it includes sales from online retailer Jet.com, which Wal-Mart purchased last year, and Wal-Mart doesn’t specifically break down sales between the two. However, it did say that the majority of the growth came from Wal-Mart’s own ecommerce platform.
Why should I care?
For markets: The American consumer may be doing better than people think.
According to previously released economic data, spending by US consumers in the first quarter was pretty weak (some economists argue that the softness was caused by tax refunds occurring later than usual this year). Wal-Mart said its sales strengthened in April, in part because those tax refunds came through – adding credibility to the idea that US consumer spending will show improvement once the second quarter figures are reported (and that’s important because consumer spending makes up two-thirds of America’s economic activity).
The bigger picture: Wal-Mart may have the money and patience to compete with Amazon.
Wal-Mart has shown that it’s not afraid to re-invest a big chunk of its profit to improve its business, particularly when it comes to ecommerce. It has spent billions of dollars in recent years acquiring smaller rivals and building out its own platform. While the company still has things to work on, including its delivery logistics (Amazon is building powerful expertise and capabilities in that area), Wal-Mart does appear to be turning consumers’ switch to ecommerce from a threat into an opportunity.