By Neil Saunders
This quarter, Walmart started to lap tougher prior-year comparatives. In this period of 2017, total revenue grew by 4.2% and comparable sales in the US by 2.7%. Despite these higher hurdles, Walmart has successfully demonstrated that there is significant momentum in its business. Overall revenue grew by a respectable 1.4% (or 2.4% on a constant currency basis), while the US put in another strong performance with total sales up 3.7% and comparable sales up 3.4%.
The refurbishment of many shops have been well received and have helped to drive up visitation, conversion, and spend.
While the results have been aided by a strong domestic economy, which has increased the purchasing power of many of Walmart’s core customers, a strong element of self-help also has propelled growth. Walmart has been exceptional at quickly adapting to the realities of modern retailing; its willingness to make investments and foster change have been key to its growth.
Making online work for customers
Online is one area where Walmart has excelled, as the 43% growth within the US e-commerce business demonstrates. Our data show that over the past 12 months, Walmart has grown its market share in every major online category. Some of this is due to strategic acquisitions, but much is also a function of the investments in e-commerce.
The relaunch of the core Walmart.com site is delivering, and the improved design, extended selection, and increased range of delivery and pickup options have been well received. Our tracking data show a rising level of satisfaction with Walmart’s online proposition and, most pleasing, an increased level of traction with younger shoppers. But more work is needed to make Walmart.com the first port of call for shoppers who are used to defaulting to Amazon and who are increasingly locked into the ecosystem of the online behemoth.
Making online work for customers has been a key priority for Walmart, but the company is also conscious that online needs to deliver profitability. We are impressed with the experimentation of automation and the testing of various last-mile solutions for grocery. Walmart has the skill, financial muscle, and physical infrastructure to drive profitable online growth in a way that many other retailers, especially grocery players, will struggle to achieve.
Remodeling drives up conversion, spend
Although digital is an important arena in which Walmart must battle, it has not blinded the company to the vital role of its stores. The refurbishment of many shops have been well received and have helped to drive up visitation, conversion, and spend.
While Walmart’s refresh isn’t as radical as Target’s, the remodels are making Walmart a brighter and more enjoyable place to shop—and in which to collect online orders. We also believe that they are helping to elevate and boost categories where Walmart has sometimes struggled for growth, like apparel.
Looking to the near-term future, we believe Walmart has a very satisfactory playbook for the holiday season. Its customer-centric services, which focus on maximizing convenience for the shopper, will be well received. It will also be able to make gains in categories like toys and clothing, where it has enhanced ranges.
Looking further ahead, Walmart’s place as a dominant force in U.S. retail looks assured. We believe more investments and acquisitions across 2019 will help it remain the leader of the pack.
Neil Saunders is managing director of research firm GlobalData Retail.