Walmart bets its stores will give it an edge in Amazon e-commerce

BENTONVILLE, Arkansas — Walmart’s cavernous stores are known for aisles of low-priced groceries, paper towels and apparel.

Now, those big boxes are hubs for its e-commerce business, serving as launch pads for delivery drones, automated warehouses for online grocery orders and departure locations for direct-to-fridge drop-offs. Eventually, they will help pack and ship goods for individuals and independent companies that sell on Walmart’s website through its third-party marketplace.

“The store is becoming a shoppable fulfillment center,” Tom Ward, chief e-commerce officer for Walmart U.S., said in his first interview since stepping into the role. “And if the store acts like the fulfillment center, we can send those items the shortest distance in the fastest time.”

Walmart is leaning into two key advantages to drive its e-commerce business: its roughly 4,700 stores across the United States and its dominance in the grocery business. Ninety percent of Americans live within 10 miles of a Walmart store. The company is the largest grocer in the U.S. by revenue. Walmart wants to expand its assortment of merchandise, improve the customer experience and increase the density of delivery routes to turn e-commerce into a bigger business.

The Covid-19 pandemic created an opening for Walmart to expand its online business. The retailer’s e-commerce sales surged, helped in large part by the curbside pickup service it launched years before other retailers scrambled to set on up during the pandemic. One dollar out of $4 that Americans spent on click-and-collect orders last year went to Walmart — more than any other retailer, according to an Insider Intelligence estimate.

The global health crisis also fueled Walmart’s sense of urgency to better compete with Amazon, the clear leader in e-commerce. Amazon has 39.5% of online market share in the U.S. compared with Walmart’s 7%, according to estimates by research firm eMarketer. Last year, based on the 12-month period from June 2020 to June 2021, consumers spent more money at Amazon than the big-box retailer for the first time, according to company filings and estimates by the financial research firm FactSet.

But the e-commerce environment has gotten tougher in recent months. Gains have slowed dramatically as more customers return to stores. Even Amazon saw stagnating numbers in the most recent quarter, reporting its slowest sales growth rate in about two decades.

Plus, as Walmart’s fuel and freight costs mount and inflation hovers at a near four-decade high, customers are buying less of general merchandise, like new clothes, because more of their money is going toward groceries and gas. Food sales have lower margins, making it harder to profit from online sales.

Walmart’s shares sank last month, as it missed quarterly earnings expectations and slashed its outlook for profits. It marked the retailer’s worst day on Wall Street since October 1987.

Even with that backdrop, Ward said Walmart benefits from having a reputation…