Wal-Mart Stores Inc outshined by Amazon.com Inc despite spending billions on e-commerce

After spending billions on its web operations to defend myself against rival Amazon.com Inc., the last thing Wal-Mart Stores Inc. wanted to tell investors was that online sales momentum was slowing.

Yet the world’s biggest retailer said Thursday that e-commerce sales rose only 8 per cent in the fourth quarter. That’s down from 10 per cent in the third quarter and 16 per cent in the second.

Related

‘Massive buying opportunity’: Canaccord says Amazon for the most part compelling valuation in yearsWal-Mart abandons growth prediction as currency hampers foreign markets

The retailer attributed the deceleration to increased competition within the U.K. in addition to economic downturns in Brazil and China. In terms of its domestic e-commerce sales, Wal-Mart would only state that its U.S. online operations have become faster than the company-wide total. However with the retailer set to invest a lot more than US$1.1 billion this season on e-commerce, investors are getting impatient.

“Their eyes were very big, and you can’t necessarily blame them for Brazil or even the U.K. or China, but they weren’t careful and conservative within their look at what e-commerce would do,” said Meredith Adler, an analyst with Barclays Plc. She said Wal-Mart isn’t currently making a profit online and hasn’t indicated if this will.



Meanwhile, Amazon said recently that it is retail sales within the fourth quarter increased 20 per cent to US$33 billion. For all retailers, online sales grew 9 per cent to US$105 billion within the holiday period, according to the National Retail Federation. Wal-Mart doesn’t disclose the amount of money of its online sales.

Despite Wal-Mart’s spending, the company is still falling lacking Amazon in price and selection, said Guru Hariharan, chief executive officer of research firm Boomerang Commerce. During the holidays, Amazon could beat Walmart.com in key areas like electronics, toys and housewares, and Target Corp. also sold items for cheaper in some categories, he explained. And Amazon were built with a significantly bigger selection than Walmart.com in each and every category Boomerang tracked.

“Why would I ever visit Walmart.com and shop there when I have lower prices on Amazon and a much higher assortment on Amazon?” Hariharan said. “Wal-Mart has to perform some soul searching and figure out what it means. They are not likely to be in a position to compete on lowest price and biggest selection anymore with Amazon.”



One area Wal-Mart comes with a benefit was groceries, analysts said. The organization has expanded its online grocery shopping to a lot more than 150 locations in at least 20 markets within the U.S., letting customers order online and get at the store without leaving their cars.

“If there is one piece Walmart knows within the U.S., it is grocery, so I think that is really a logical move forward,” said Robert Drbul, an analyst with Nomura Securities.

But other competitors aren’t far behind. Amazon is testing its very own grocery delivery service, which might use drones, and Google may even enter the market with its self-driving cars, Hariharan said.

“Wal-Mart includes a five- to 10-year advantage in grocery,” he said. “They really need to double recorded on that because rivaling Amazon in price is turning out to be a bad idea.”

Bloomberg News