Walmart expects its ecommerce business in the U.S. to become profitable for the first time this year, the company said at its annual Investment Community Meeting on Wednesday.
“This is a milestone moment for our company,” said John David Rainey, chief financial officer.
The forecast comes despite the pressure that the company might face on its overall operating earnings from the tariff battle underway between the U.S. and the rest of the world, which is expected to drive up costs for many products.
Although just a few years ago Walmart said it had lost about $1 billion on its ecommerce business, the company has been able to leverage its scale to the point that it is seeing profitability in the current fiscal first quarter, Rainey said.
The efficiency of Walmart’s store-based delivery
David Guggina, executive VP and chief ecommerce officer, said Walmart is achieving ecommerce profitability in the U.S. in part because of the efficiencies driven by leveraging store-based deliveries. Also key to the growth of the business has been customers’ willingness to pay more for faster delivery, he said. Customers pay an extra $5 to get a delivery in three hours or less, and an extra $10 to get delivery within an hour.
“We’ve seen that when customers start using fast delivery, it sets off a flywheel effect,” Guggina said. “They visit more often, fill their baskets with a broader mix of items, and their average order size goes up.”
About a third of store-fulfilled orders in the U.S. are now considered fast delivery. In addition, Walmart expects e-commerce profitability to improve as customers incorporate more high-margin general merchandise in their orders on top of lower-margin grocery items.
More details: Fast delivery reaching 95% of households
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The company expects it will soon be able to deliver to 95% of U.S. households in under three hours. Currently 93% of U.S. households can receive same-day delivery
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More than half of ecommerce orders are flowing through Walmart’s automated fulfillment centers
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The company has so far made 120,000 deliveries via drone, and customers have given positive feedback, the company said
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Ecommerce is projected to account for 60% of sales growth in the U.S. during the next five years
In their own words: “A decade-long journey”
“We’ve been on a decade-long journey to reshape the economics of our ecommerce business.” —David Guggina, executive VP and chief ecommerce officer, Walmart
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