Back in the middle of summer in Las Vegas, with temperatures in the 40s Celsius, the more than 1,500 participating sellers were thinking about the Christmas shopping season months away.
Santa Claus dressed as staff wanders around, and sellers are invited to come — they sell on Walmart.com. They received a gift from Walmart in advance: no additional peak season storage fees.
Everything at the meeting showed that the holiday season at the end of 2023 will be a big test of Walmart's e-commerce strategy, and the performance of merchants will also have a profound impact on sales in the coming year. In this regard, for sellers, Walmart CEO Doug McMillon said meaningfully: We hope you grow together with Walmart, and we hope you bring us high-quality goods.
Winning more third-party sellers is becoming one of the strategies that Walmart has been aiming at in terms of e-commerce efforts for more than a year. Third-party sellers can help Walmart expand its product range and attract more shoppers to shop on its platform, which is a key reason for the success of Amazon, the largest e-commerce company in the United States.
Walmart's trick seems to work, too. In Q1 and Q2 this year, Walmart's U.S. e-commerce sales increased by 27% and 24% year-on-year respectively. There are also signs that Walmart is eating into Amazon's e-commerce market share.
At a time when the future of other retailers in the United States looks bleak, Walmart and Amazon fairies are fighting and are particularly eye-catching. It's just this time, how far can Wal-Mart, which once fell into the name of "digital dinosaur" due to the slow progress of e-commerce, chase it? Is it possible to shake Amazon's "e-commerce supremacy"?
Catch up with Amazon
In 1994, Amazon was founded. In 1996, Wal-Mart launched its own website, Walmart.com.
The Internet wave hit, and it can be said that Walmart did not lose at the starting line at all. Unfortunately, at that time, Wal-Mart only used the website as an information display window, and it was not until the end of 1999 that the shopping function on its website was barely launched, and the experience was extremely poor.
In the new century, Wal-Mart's e-commerce development is still unsatisfactory. According to eMarketer data, until 2018, Walmart accounted for only 4% of the U.S. e-commerce market, which is a drop in the bucket compared to nearly half of Amazon's market share. In order to catch up, Walmart even changed its name, removing the suffix "stores" from the company name Walmart Stores, and began to move forward at full speed on the road of digitalization.
The pandemic catalyzed online Walmart. In Q1 2020, Walmart's U.S. e-commerce sales increased by 74% year-on-year, surpassing eBay to rank second in U.S. e-commerce. However, with the end of the epidemic, Walmart's e-commerce sales have declined, and the gap with Amazon has widened in terms of market share. From Q1 2022 to Q1 2023, Amazon's share of e-commerce in the United States increased from 43.7% to 47.9%, while Walmart's share of e-commerce in the United States increased by only 1 point, from 5.7% to 6.7% in the same period.
How to get e-commerce back on the growth track? Walmart is targeting middle- and upper-income people in the United States.
Now click on the Walmart website and you'll see a clearer and more beautiful page with a more prominent selection of products than before.
"With the redesign, we wanted to present a more engaging way to browse and provide consumers with a new shopping experience." Tom Ward, head of U.S. e-commerce at Walmart, said.
Walmart is appealing to consumers with something they "don't necessarily look for" rather than providing a practical shelf for consumers who "already know what they want."
For example, an outdoor stove brand called Solo Stove starts at $100 on Walmart's website, and a set that includes a ondol, stove lid and portable camping accessories can cost up to $1,155.
John Merris, the chief executive of Solo Stove, was initially worried about whether Solo Stove would fail on Walmart's website. "Will Walmart attract customers who are willing to buy expensive non-essential items? Does the appearance of a product on Walmart affect the brand's image in the minds of consumers? Do consumers perceive the quality of the product as a result? ”
However, during Walmart's July 2023 promotion, Solo Stove's sales were boosted, with sales increasing by 300% compared to the same period last year.
After this revision, Walmart's website not only attracted more consumers, but also increased sales of third-party sellers, which attracted more third-party sellers to settle in.
Not only that, Walmart has also relaxed the GMV threshold restrictions for Chinese sellers. Walmart has long been interested in a cost-effective Chinese supply chain, and since March 2021, it has officially attracted investment from Chinese sellers, and by mid-January 2022, 8,000 Chinese sellers have settled in Walmart, accounting for 14% of its total new merchants in the same period. Just a year ago, Walmart clearly listed the GMV threshold for Chinese sellers in the investment conditions, and it will be completely canceled by the beginning of 2023, which shows the importance of Chinese sellers to Walmart's e-commerce.
For U.S. sellers, Walmart has launched the "New Seller Enablement" program, which allows new U.S. sellers to enjoy a 25% discount on referral fees, and a 10% discount on service fees if they complete a new seller survey before going live.
At the same time, Walmart continues to promote logistics construction, and has equipped its distribution centers and offline stores with automation equipment.
"Walmart is now able to offer more products with one- to two-day delivery, and when sellers use our fulfillment service and can deliver within two days, the conversion rate of sellers staying at Walmart for a long time will be significantly improved." said John Furner, president of Walmart America.
At present, 95% of the products sold on Walmart's website come from third-party sellers, and its third-party sellers have outpaced Amazon's growth, and Walmart CFO John David Rainey is confident about this. He said at a public meeting that in the next five years, Walmart will become less dependent on physical store revenue, and the service fees charged to third-party sellers on the Walmart.com, as well as the advertising fees charged by Walmart's retail media business, will become Walmart's fastest-growing business.
Walmart on what basis
Walmart was able to capture third-party sellers in the U.S. market, where e-commerce is more mature, and website recommendations, policy support, and logistics advantages all contributed to some of the reasons, but in the final analysis, business flow still has to chase the flow of people.
A large number of wealthy Americans are pouring into Walmart.
Doug Macmillan elaborated on the Q4 2022 earnings call: "We are growing market share across all revenue groups, including at the premium end, which once again accounted for nearly half of our growth in the U.S. market this quarter. ”
In the past, in the minds of Americans, Walmart tended to be associated with low-income people. In the 60s of the last century, Wal-Mart was born in a small town, and the flow of people in the town was not so large, so it could only rely on cost-effective products to attract consumers. And the high cost performance comes from skipping the middleman and finding low-cost sources.
In order to achieve "low prices every day", Walmart makes full use of its scale advantage of more than 4,600 offline stores in the United States to obtain strong premium capabilities through large-scale purchases. In contrast, Amazon, as an online channel, has unlimited shelves and three times as many SKUs as Walmart, but many of them are long-tail products purchased in small quantities. According to statistics, Walmart's sales and purchases of each variety are about 6 times that of Amazon, and Walmart has a price advantage for most frequently purchased items.
When the time comes, in the post-epidemic era, the middle class in the United States and even the world is facing shrinking assets.
In 2022, the median household income in the United States fell by 2.3% from the previous year, marking the third consecutive year of decline and the largest decline since 2010. At the same time, along with sharp inflation, the cost of living for American households has risen significantly, hitting the highest level in more than 40 years.
But on the other hand, many American families have experienced a middle-class lifestyle, and they have a more intuitive perception and consumption preference for high-quality goods. But now, they have to tighten their wallets, hoping to find good prices and create a new balance between price, quality and brand.
As a result, many shoppers who only buy groceries on Walmart are becoming regular consumers who buy more items. Wal-Mart, on the other hand, takes advantage of its own traffic and channel advantages to often put high-profit recommended products in a conspicuous position, and stimulates consumer shopping demand with prices lower than similar products in the market, resulting in explosive sales in mid-to-high-end brands such as Solo Stove.
Whether it's groceries or mid-to-high-end items, Walmart is closer to a value retailer. In this inflationary world, Walmart itself, together with a number of third-party sellers, has formed an economic force to be reckoned with, continuing to export valuable "deflation".
Another advantage of Walmart to attract third-party sellers is that Walmart offers the possibility to sell products on its e-commerce platform in offline supermarkets. If you take into account the sales of more than 4,600 offline stores in the United States, Walmart is clearly a traffic empire that can rival Amazon.
A year and a half ago, Lucky 21, a children's clothing retailer that has been successful on Amazon, tested some items on the Walmart website. Melissa LaCognata, vice president of Lucky 21, said that she knows that Walmart lags behind Amazon a lot in terms of e-commerce, and when she learned about Walmart's investment in e-commerce platforms and a series of policy support for third-party sellers, she already felt that Walmart has a large physical customer base and considerable online traffic.
"It's like being in the second best shopping mall in the world, so why not give it a try?" Melissa Laconata said.
Who is the winner
Amazon currently accounts for about 48% of U.S. online retail spending, Walmart accounts for about 7%, and Amazon accounts for about one-seventh of Amazon's, according to data surveyed by analytics firm PYMTS.
If you look at the long-term axis in the future, is it possible that Walmart will continue to close the gap with Amazon in some way in terms of e-commerce?
Annie, an Amazon employee in the United States, believes that Amazon has an overwhelming advantage over Walmart in terms of all categories.
She told the brand factory, "The richer the category, the wider the choice of consumers, the greater the dependence on you, and in the United States, Amazon covers all the needs of a family inside and outside, and Amazon Prime members enjoy the benefits of shopping, as well as free trial music, free download of e-books and other benefits." ”
From Annie's point of view, if Walmart wants to become an everything store like Amazon, it will be a long-term battle, and it will not be able to do it all at once.
First of all, the construction of a 10,000-store, requires the introduction of millions of more products, which means that a lot of money needs to be spent every year to build a warehouse network. For more than 20 years, Amazon has been investing heavily in infrastructure such as warehouses, and on the other hand, it has relied on high-margin businesses such as Amazon Cloud Computing Platform (AWS) and Wall Street investors to continue to transfuse real money.
Moreover, in the field of e-commerce, Amazon's B2C logistics network and Walmart's B2B logistics network are not the same in terms of complexity and difficulty in fulfillment. Although 90% of the American population lives within 10 miles of Walmart stores, Walmart can rely on its more than 4,600 stores in the United States as mini warehouses, but this is not enough to complete the delivery of goods in online stores.
Today, more than 20 years is obviously too long, and Amazon's construction of 10,000 stores undoubtedly occupies a first-mover advantage, using the scale effect of the Internet to establish high barriers.
But Amazon is by no means invulnerable. After all, in terms of meeting the basic needs of people's lives, this is not a pure Internet business, but relies on offline heavy work, and the network effect of the Internet has its boundaries.
Compared with long-tail products on Amazon, daily necessities place more emphasis on the low-cost capabilities and instant delivery capabilities of the supply chain. For example, fresh foods such as fruits and vegetables are delivered in perfect condition, which is much more difficult than other goods. And in these aspects, Walmart has the advantage.
Therefore, if Walmart can build on its inherent supply chain advantages and offline store advantages, steadily expand its categories, and fully link online and offline omni-channel development, it may still have the opportunity to compete with Amazon in the future, and even export a new sample of omni-channel linkage development for the retail industry.
As Rick Watso, founder and CEO of RMW Commerce Consulting, an e-commerce consulting firm, puts it: Closing the huge gap with Amazon is an uphill climb for Walmart, but it's also an opportunity.