Jan 2, 2017
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Wal-Mart's tortoise-like digital pace may pay off

Jan 2, 2017

Wal-Mart Stores' tortoise-like digital pace may yet pay off. The $218 billion retailer is making some strides with its e-commerce efforts as sales increase. August's $3 bln purchase of Jet.com will accelerate the push to compete with Amazon. Patchy customer service and a brick-and-mortar image are some of the remaining hurdles to the plodding retailer's online success.

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Chief Executive Doug McMillon has made internet sales a priority after earlier efforts to kick-start growth fell flat. Jet.com founder Marc Lore - now Wal-Mart's head of e-commerce - had the right ambition. He planned to compete with Amazon on price, but hit a speed bump after Jet was forced to drop its annual membership fee shortly after launch. Still, Lore's past success with the sale of the company behind Diapers.com to Amazon means he knows how to get the online giant's attention.

Jet is already helping boost sales. Digital revenue jumped 20 percent year-over-year in the three months ended in October, nearly double the 12 percent growth notched in the previous quarter, before Wal-Mart closed the Jet deal.

Along with buying Jet, Wal-Mart took a 10 percent stake in China's JD.com and may be eyeing a similar deal with India's Flipkart. It's targeting e-commerce growth of 20 percent to 30 percent CAGR over the next three years as it prioritizes e-commerce ahead of new store openings. Any growth will be from a low base, however. Online revenue represents about 3 percent of some annual $480 billion in top line.

There are other points of weakness, too. Amazon is easier to use, with better shipping options and the world's biggest online inventory. Wal-Mart scores lower on WPP's BrandZ list of the most valuable global brands, notching at 32 versus Amazon in seventh place. Alphabet unit Google places first. The survey also showed Wal-Mart lagging Amazon in customer service in important categories like electronics. That's important: a separate analysis found that the top 30 brands in 2016 outperformed the global MSCI index over the last five years.

With Jet's charismatic founder now sweating such details, Wal-Mart's attempt to catch up to Amazon should gather pace in 2017.


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