Wal-Mart boosts e-commerce over more brick-and-mortar stores

The king of box stores is turning its focus toward competing with Amazon and other online retailers as future generations prove more willing to shop with a mouse click rather than driving to stores.

First Look

Ahead of a meeting with investors on Thursday, Wal-Mart said it planned to scale back plans to open up new stores in favor of investing more in e-commerce, as the retail giant tries to fend off online competition from Amazon.

Wal-Mart has installed mobile payment systems for checkouts and established new online pickup and grocery services, according to the Associated Press. And it has paired them with a round of investments in e-commerce companies and a planned expansion of warehouses for online sales, in what many market analysts describe as a model geared toward "the consumer of the future."

Last month, the company closed the deal on its $3 billion acquisition of online retailer Jet.com, and on Wednesday, it announced that it had increased its stake in Chinese e-retailer JD.com, from 5.9 percent to 10.8 percent. In late September, Wal-Mart was reportedly in advanced talks with Indian e-retailer Flipkart over a potential $1 billion investment.

Such moves, said chief executive officer Doug McMillon in a statement to the Associated Press, were part of the company’s effort "to win the future of retail."

"Our customers want us to run great stores, provide a great e-commerce experience and find ways to save them money and time seamlessly – so that's what we're doing," he said. 

Over the past four years, Wal-Mart has gone from investing $300 million (in 2013) to $1.1 billion this year, according to public filings and earnings transcripts reviewed by Reuters. The push responds to Amazon’s encroachment on brick-and-mortar sales, and to broader industry trends.

In a report this year, London analysis firm Ovum wrote that in 10 years, consumers would expect 24-hour “"instant access and fast turnaround" – especially Millennials and the tech-savvy "Generation Z," those born between 1996 and 2010.

"These generations are constantly connected and inhabit an online environment where events happen in real time without them having to wait, and where social media enables them to dictate terms," the firm wrote.

"However, by 2026, instant gratification … will have evolved into expectations of a seamless shopping experience across an increasing range of connected devices, in which immediacy and convenience are paramount."

"Instant access and fast turnaround will still be a key part of the equation, but other expectations will have come to the fore: proactive customer service and support, and free or very low-cost delivery anytime, anywhere. Consumers will expect goods advertised online to live up to the promise in every way.... This places great pressure on retailers, and those that fail to meet expectations will fall by the wayside."

In the meantime, Wal-Mart isn’t stopping its opening of new brick-and-mortar locations entirely. This year it will cut the ribbon on 130 new stores in the United States this year, and another 55 will open next year – 20 of which will be the particularly successful small-scale stores that the corporation calls "neighborhood markets."

The company's website has become the nation’s second-largest online retailer by traffic, boasted Mr. McMillon in a September blog post, with the number of items sold online expanding from 7 million to 15 million.

"Within a year," he wrote then, "we've created one of the largest online grocery businesses in the country."