Has Investing in E-commerce Been a Good Growth Strategy for Walmart Inc.

Categories: E Commerce

Introduction

The aim of this extended essay is to answer the question “To what extent has investing into e-commerce been a good growth strategy for Walmart Inc.

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within the United States from 2016-2018?”: the company is a corporate giant, it has been growing since it had opened it’s first store, in 1962. The question is worth investigating, since Walmart Inc. had been developing both as a physical wholesaler and introduced ecommerce along the way and has been developing both of these points of sale, adhering to the US, and world customer needs.

The essay will focus on the income and sales, attributed by the respective sales points, comparing and contrasting the two to form a conclusion, and answer the set question, “To what extent has investing into e-commerce been a good growth strategy for Walmart Inc. within the United States from 2016-2018?”. As Walmart Inc. has seen massive growth in e-commerce sales, the question is worth investigating to see, whether investing into e-commerce was the right move for Walmart Inc. The question itself is important to answer, as the e-commerce market is growing, and had been growing in the period, selected in the question, in addition to this, the United States is where Walmart Inc. is based, and has it’s warehouses and most retail stores. What makes the research worth reading is mainly the scale, with Walmart Inc., being a massive established company, it is truly fascinating to see to what extent it conforms to customer needs and invests into e-commerce, in addition, whether it benefits from it.

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Methodology

Sources

One major secondary source that is utilised in this extended essay is the Walmart Inc. website, as Walmart Inc. is a public limited company, it is obliged to share information about its finances, stocks, strategies, corporate governance, and stores. To an extent, it is a rich source, filled with valuable, unbiased information, yet not entirely, Walmart Inc. website will not tend to post negative reports, or news about their company, as well as try to make the reports and information more appealing to investors, making the selectiveness of information, put on the website, a limitation of this source. One large benefit of using Walmart Inc.’s webpage is, that it is updated very often and all the information, that can be found there is archived and saved, giving the possibility to compare and contrast the data, as well as recognise any trends.

Tools

One of the tools, used to analyse and give supporting arguments for the question is a STEEPLE analysis, STEEPLE analysis is going to be used to analyse the external environment of Walmart Inc.’s market, and what external factors influence Walmart Inc.’s ecommerce growth. With a full STEEPLE analysis, it will be a simpler task, to judge which external factor has been the most influential for, or against, Walmart Inc., in addition to that, analysing the external factors, affecting the wellbeing of the multinational, will allow for a more rational answer to the question and evaluate the significance of the external environment. Another business tool that is used to support arguments for the document’s research question is a SWOT analysis, the more specific context, in which it will be used, is to analyse the effectiveness of Walmart Inc. investing into ecommerce.

Main Body

Ecommerce has been increasing a bit for the for the latter half of the chosen timeframe of the research question, in 2017 customers in the US have spent $449.88 billion online with US merchants, and in 2018 customers have spent $517.36 billion, up 15% from the prior year https://www.digitalcommerce360.com/article/us-ecommerce-sales/). Using SWOT analysis of Walmart Inc. with ecommerce, one can spot all the details, considering the fact, that ecommerce has been growing, Walmart Inc. has a difficult task of entering a live market, to an extent. Walmart Inc. has a potential opportunity to scale with ecommerce, they are the market leader in retail sales, and they have a large number of regular stores (for in-store pickup) and warehouses that can aid them with managing an ecommerce part of the business. Another advantage Walmart Inc. has, compared to a new business is a large amount of potential investment capital, with which they can grow into the ecommerce market, in addition to that, the capital doesn’t need to be used for warehouses, as Walmart Inc. has enough of them to store all products, also the capital will not have to be used for salaries and wages for hundreds of people like it would in a regular retail Walmart Inc. store, there would be little extra machinery that would have to be supported, leaving Walmart Inc. with one place to invest the money, that they use for the expansion – into marketing. By the time of this essay being written, Walmart Inc. has already passed Apple Inc. and became the 3rd largest online retailerz (www.cpcstrategy.com/blog/2019/01/walmart-ecommerce/). On the other hand, one massive threat is the fact that, the ecommerce retail market is very saturated, and a monopoly already exists there, with websites like Amazon.com, Alibaba.com, JD.com, or ebay.com, it is not easy for a new business to enter that market, yet for Walmart Inc., their brand makes it an easier task to do, but that still isn’t enough for Walmart Inc. to reach the top, if it ever will. Even if, as previously stated, Walmart Inc. will use its brand and their marketing budget, they might come close to the established ecommerce stores, yet there is a minimal chance that it can pass them. Another weakness of the strategy is the fact that, online stores are not very solvent, in case of bankruptcy, unlikely as it may sound, Walmart Inc. having only warehouses and more online stores doesn’t put them in the best position with a lot of assets.

A factor that will, most surely, affect Walmart Inc. During their expansion into ecommerce is a Political one – foreign trade, Walmart Inc. is not a franchise business, meaning that an entrepreneur cannot buy the rights to sell under their name, leaving no work for Walmart Inc. in that location, apart from quality and regulations audit. Walmart Inc. expands as he business, and all stores are owned by them, yet Walmart Inc. has found a way of cutting costs and, instead of expanding into every country, they a located in almost every continent, due to their scale it is made possible to offer the delivery on the large radius from the warehouses. What Walmart Inc. does as one of their main ecommerce expansion strategies, is the acquisition of numerous websites, Walmart Inc. owns websites like Asda.com, Jet.com, Art.com and many more (https://moneyinc.com/companies-you-didnt-know-walmart-owned/). Walmart Inc., with the acquisition of these websites, doesn’t have to worry so much about monitoring hundreds of stores, and instead only has to audit and have its name behind these online stores. With the acquisition of the websites, Walmart Inc. doesn’t have to worry about foreign trade as much as if it was doing it as Walmart Inc., a US based company would have different regulations than the local websites, owned by a US based company, such as Walmart Inc.

Another factor that will affect the expansion is Walmart Inc.’s financial accounts, Walmart Inc. is a stable plc, with very high numbers on their revenue statements and even profit statements, to expand their ecommerce market position, Walmart Inc. will not even have to consider acquiring any liabilities, and will be able to swiftly relocate some of the company’s capital into the expansion, mainly into marketing, as stated before. Since Walmart Inc.’s financial accounts are rising (appendix 1), Walmart Inc. will be able to allocate the budget and make it a large one, since Walmart Inc. is a large multinational, they will not have any problem finding a large budget, especially that the biggest cost is almost eliminated – workers’ pays. Since Walmart Inc. would be able to allocate a budget and not suffer much if the investment fails, it reduces the risk for Walmart Inc. as they will not have to spend a lot of time before the expansion, what would take a lot of time would be cash flow forecasts, risk assessments, with the reduced risk, and Walmart Inc.’s colossal size, a lot of time will not be necessary. Yet the financial accounts do not properly reflect Walmart Inc.’s success in ecommerce, there can be not proper link established. Hence, if Walmart Inc. were to consider expanding with ecommerce, they don’t have a proper base to start analysing it, since it isn’t definite, that Walmart Inc. have large sales in ecommerce with their exact products. Since this exact move is considered market development, which is known to be not the riskiest strategy, Walmart Inc. hasn’t done something exactly like this, and has no ground to stand on with the expansion as they have no previous experience with that. What will be of aid for Walmart Inc. if it decides to expand, it has the capital to invest more into management structures – as it has been doing for the past 4 years (appendix 1).

Conclusion

Considering everything that has been stated in the Extended Essay, it is possible to deduce that Walmart Inc. would benefit from expanding into ecommerce, in the short-term, Walmart Inc. will be able to have expanded into the ecommerce market and has the option of benefiting very positively from the expansion due to marketing and established brand. In the long-term it will be crucial for Walmart Inc. to have expanded into ecommerce.

Bibliography

  1. Ali, Fareeha, et al. “US Ecommerce Sales Grow 15.0% in 2018.” Digital Commerce 360, 28 Feb. 2018, www.digitalcommerce360.com/article/us-ecommerce-sales/
  2. Swan, Greg. “Why Walmart’s Ecommerce Strategy Makes Them A Contender Against Amazon.” Tinuiti, 21 Jan. 2019, www.cpcstrategy.com/blog/2019/01/walmart-ecommerce/
  3. Flynn, Liz “20 Companies You Didn’t Know Walmart Owned.” Money Inc, 18 Apr. 2019, moneyinc.com/companies-you-didnt-know-walmart-owned/.
  4. Macrotrends. “Walmart Financial Statements 2005-2019: WMT.” Macro Trends, 2019, www.macrotrends.net/stocks/charts/WMT/walmart/financial-statements.
  5. Magana, Gregory. “Walmart Is Testing a New Employee Structure with Fewer in-Store Managers Who Will Be Paid More.” Business Insider, Business Insider, 6 May 2019, www.businessinsider.com/walmart-testingnew-employee-structure-2019-5?IR=T.

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Has Investing in E-commerce Been a Good Growth Strategy for Walmart Inc.. (2021, Sep 10). Retrieved from https://studymoose.com/has-investing-in-e-commerce-been-a-good-growth-strategy-for-walmart-inc-essay

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