Walmart is by far not only the world's largest retailer but the biggest company overall by sales volume, with 2012 revenues of some $469 billion.
But the company is now dramatically upping its ante in e-commerce, where it badly trails the growth machine that is Amazon.com, which chalked up some $61 billion in 2012 sales, most of that total from e-ecommerce, versus just an estimated $7.7 billion for Walmart's on-line group.
And for a company that rarely admits to mistakes, Walmart recognizes it got a late start in really focusing on its e-commerce engine.
"We're starting to gain traction," Chief Executive Mike Duke said during the company's annual meeting this month, according to an article last week in the Wall Street Journal. "I say starting because we know that it's an area we still have a long ways to go."
Part of that relativc lack of attention was simply the business math. Walmart's e-commerce business represents just a couple of percent of the company's sales, while Amazon is all about e-ecommerce.
That disparity, especially as Walmart focused much energy on building out, largely through acquisition, a global physical store network, led to a somewhat hodge-podge approach to the critical component of e-fulfillment. That included somewhat randomly using third parties, some of its own "dark stores" and other facilities rather than building out a network with really well thought strategy.
That is all changing, Walmart says, and e-commerce is now "a top priority."
As Amazon has seen its revenues soar, that has generally come at the expense of profits, as the company makes massive investments in distribution centers, IT and low priced shipping. CEO Jeff Bezos is willing to sacrifice margins in the name of grabbing market share - successfully, it appears, as Wall Street continues to push Amazon's stock price higher despite weak earnings (we will note cash flow performance is better than profits).
But Walmart.com is the relatively new kid on the block, run out of a California office, rather than the Bentonville, AR corporate headquarters. While the e-commerce group wanted to focus on growth, some executive at the headquarters wanted to emphasize profitability. Showing tensions that exist at other brick and mortar retailers as well, two years ago Duke emailed Walmart.com executives and asked if the company should avoid promoting special Web deals on "Black Friday" over concerns the volumes would overwhelm the distribution network without adding to profits.
E-commerce at Wal-Mart is run as a distinct business, with its own headquarters, CEO and merchants who buy items specifically for the website.
"Every year, executives would start a five-year planning exercise, but the plans were never executed and management would say the sales weren't there to justify the investment capital," says a former Walmart online-division executive, according to the Wall Street Journal.
The hodge-podge network it developed for e-fulfillment proved costly. The Wall Street Journal says. "Walmart is being forced to invent its own solution because it still hasn't figured out how to economically deliver all its products into the hands of online shoppers, current and former executives say."
Walmart's on-line shipping can costs range from $5 to $7 per parcel, according to some estimates (Walmart does not break out those numbers), versus just $3 to $4 per parcel for Amazon. That difference is exacerbated by the generally lower dollar value of each order for Walmart versus Amazon.
Walmart now says it is making up for lost time.
(Supply Chain Trends and Issues Article - Continued Below)