Wal-Mart's online sales growth decelerates, trailing growth of Amazon

[CHICAGO] Wal-Mart Stores appears to have hit a speed bump in the race to grow online sales.

The retailer's e-commerce sales rose 8 per cent in the fiscal fourth quarter ended Jan 31, for a fourth straight period of decelerating growth. Growth has gone from 17 per cent in the first quarter, to 16 per cent in the second and 10 per cent in the third. The numbers exclude the impact of currency swings.

Wal-Mart, which reported quarterly results on Thursday, said the slowdown was due to weakness in China, the United Kingdom and Brazil. It does not break out figures for individual markets, including the United States.

The numbers suggest Wal-Mart is slipping further behind online leader Amazon.com, whose North America sales grew 24 per cent and international sales grew 22 per cent in the fourth quarter on constant currency terms.

"It's definitely a challenging trend," said Keith Anderson, vice president at e-commerce analytics firm Profitero.

"The really troubling aspect of it is the fourth quarter. It's the holiday period."

Amazon outstripped industry-wide US online growth in the fourth quarter, which was 14.7 per cent, according to Department of Commerce data. Amazon now has a 23.7 per cent share of the US online market, compared with Wal-Mart's 2.5 per cent, according to retail consultancy Conlumino.

When asked about bridging the gap with Amazon, Wal-Mart e-commerce head Neil Ashe told reporters he was focused on "building the customer relationship" through the retailer's mobile app, services like grocery pickup, and by growing assortment.

"The customer is reacting positively to that," he said.

The soft showing in Brazil reflects an economic slump impacting all retailers, while Wal-Mart's struggles in China are partly due to gains by Alibaba Group Holding Ltd, a factor also likely cutting into Amazon's sales there, Profitero's Mr Anderson said.

But Wal-Mart's slowing growth also highlights broader challenges of logistics and price competitiveness, including in the key US market, Mr Anderson said.

According to a recent Profitero survey of 2,461 products, Amazon had lower online prices than both Target and Wal-Mart across six product categories. Mr Anderson says Amazon also has the upper hand on selection and delivery times.

Wal-Mart contests that it is more expensive, saying its own survey of a wider assortment of items shows it has the same or lower price than leading online competitors four out of five times.

Wal-Mart has spent aggressively to become more efficient, earmarking US$2 billion over two years to build out its e-commerce infrastructure, including on dedicated online fulfillment centers that can sort and ship packages at a lower cost.

Keeping pace with Amazon will not be easy. The Seattle-based retailer spent US$4.6 billion on capital expenditure last year, and continues to expand its Prime program, which is estimated by some analysts to have 50 million members worldwide.

Mr Anderson said Wal-Mart is struggling to broaden its customer base beyond its core bricks-and-mortar shoppers. But he sees an opportunity for the retailer to gain traction with services like store pickup that "play to their strength of having a very large network of stores."

REUTERS