SKU’d Thoughts 9: What does Walmart’s e-commerce surge mean for startups?
At the end of 2018, the world’s largest retailer, Walmart, reported a 40% year-over-year increase in e-commerce sales and indicated that it anticipates the continued growth of its e-commerce business. The catalyst for this improvement in e-commerce sales has been its investments into the direct-to-consumer value chain; brands, infrastructure, and delivery. Startups in these spaces are prime targets for Walmart if it intends to continue growing its e-commerce business.
Walmart has acquired a slew of digitally native brands (Bonobos, ModCloth, ELOQUII, etc.) while incubating its own DTC private-label brands. The acquired brands have a loyal customer base that Walmart can now leverage strategically to gain incremental revenue. According to Digiday’s Hilary Milnes, the strategy is to develop a comprehensive DTC brand portfolio to attract the nontypical Walmart customer and expose that customer to Walmart’s private-label brands in categories such as bedding and apparel.
In addition to acquiring promising brands and their captive customers, Walmart has also invested in infrastructure that will support providing a great customer experience. It’s $3.3 billion acquisition of Jet.com in 2016 set the foundation for Walmart’s e-commerce push. With Jet.com’s team, Walmart now had the know-how on improving shipping options and strengthening its fulfillment network. Walmart also has a 50-acre e-commerce fulfillment center in Florida that holds millions of inventory items on site. The warehouse positions the retailer to support faster fulfilling and shipping of online orders directly to customers or to stores for free pickup.
The last and most important piece of the e-commerce puzzle is delivery — last-mile delivery to be exact. Last-mile delivery is the final movement of products between a distribution center and the point at which the end consumer will receive it. In Walmart’s case, that endpoint can be at the customer’s home or office or one of Walmart’s more than 4,700 stores in the U.S. Retailers have not been able to fully solve last-mile delivery because of its inefficiency and high cost at scale. Walmart acquired Parcel, a technology-based, last-mile delivery company to provide same-day deliveries to its New York City customers. Additionally, Walmart’s high store count is an advantage in last-mile delivery. Since there’s a Walmart store within 10 miles of 90% of the U.S. population, the retailer can provide customer satisfaction with free in-store pickup.
Walmart’s focus on its e-commerce business is great news for startups. The company aims to provide a more differentiated product mix, attract a higher-income customer and improve delivery logistics. Startups building great DTC brands or solving the last-mile of the delivery puzzle are certainly on the giant retailer’s radar.
Cross-posted on Medium