Walmart is the most dominant brick-and-mortar retailer in the nation. Amazon, in comparison, runs the world of e-commerce. However, for the last few years, Walmart has been trying to catch up.
In 2016, Walmart bought Jet.com for $3.3 billion in an attempt to close the ever-growing gap between the two companies. Jet is a fast-growing e-commerce company created by Marc Lore, who also founded Diapers.com, which was bought by Amazon.
CEO of Walmart Doug McMillion also brought Lore on board to run the e-commerce part of the company and help with the facilitation of needed changes.
And it did work, somewhat. Walmart stock is up 53% from three years ago, and its US online sales have increased by 40% in just the last year.
However, it still has a long way to go to catch up.
There are essentially two things that Lore has suggested that will dramatically make up for their lack of competition.
Firstly, Walmart needs to expand and create more warehouses if they are to store and send out as many products as Amazon does. Currently, Amazon has 110 distribution centers in the US; Walmart only has 20.
Secondly, the company will need to increase its selection of products. At present, their in-store collection is not capable of handling the demands that Amazon’s product catalog boasts.
However, building more warehouses will cost billions a year, something that the board is quite willing to do yet, nor do they have the funding for.
Unlike with Amazon, Wall Street investors have not given Walmart the same amount of trust and therefore, money.
Added to the cost of building new facilities, the company would need to hire many more employees to take on the job of getting new brands and making sure their products are also high in quality, something they have found a little challenging, to say the least.
Board members are uncertain about spending so much money up front in the hopes that they will catch up in years to come.
However, they have agreed to make some investments that will at least expand some of their current warehouses and make them better for e-commerce.
Walmart has also taken on more than 2,000 new brands in the last year to bridge the gap as well. And CEO Doug McMillion says, “It’s taking longer than I thought it was going to.”
He added, “I have been surprised at just how many brands there are out there to get signed up… Who knew we needed 2,000 of them? I didn’t.”
And when Amazon announced they would be decreasing standard shipping time from two days to one for Amazon Prime members, Walmart quickly announced that they would offer free, next day shipping on a selection of about 220,000 products, even for those without a membership.
However, Amazon can send out over 10 million products in comparison.
Walmart hopes that this new push for free, next day shipping will encourage consumers to buy multiple items at once, which the cost the company less to send out in just one box from the same warehouse than shipping from various locations.
However, trouble seems to be mounting with all the changes needed.
According to several sources, Walmart’s e-commerce division is expected to lose over $1 billion this year. And, understandably, McMillion and the board members aren’t happy about it.
As a result, the board of directors is pressuring Lore and his online business to cut costs wherever possible, which will likely include the sale of ModCloth, a recently acquired online fashion brand.
This causes even more tension to grow between Lore and McMillion, as it has been said by Walmart staff their leader is miffed that Lore continues to get all the credit for the company’s recent success while McMillion and others are doing the brunt of the work.
Lore, who has not had a boss since the early 2000s is not particularly impressed with being told what to do and how to run his business.
Lore has signed to work with Walmart on this endeavor for five years, but several of those closest to him say they would be surprised if he stayed that long.
Infighting may not be uncommon in large companies such as Walmart, but the company incurs delays and losses.
As a result, the effects could be catastrophic and would ensure that Amazon would reign supreme in the online world.