COVID-19

How will Walmart keep its sales growth going?

Kristin Schwab Feb 18, 2021
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Walmart's profits rely primarily on customer loyalty. Joe Raedle/Getty Images
COVID-19

How will Walmart keep its sales growth going?

Kristin Schwab Feb 18, 2021
Heard on:
Walmart's profits rely primarily on customer loyalty. Joe Raedle/Getty Images
HTML EMBED:
COPY

Walmart is still riding the sales surge it’s enjoyed since the beginning of the pandemic. But there are signs that those sales are now slowing. Online sales rose 69% last quarter, down from 80% in the previous quarter, making it Walmart’s slowest quarter of growth since the pandemic began.

That means for Walmart, the months ahead will be about trying to hold on to its momentum as other businesses start to open up again.

One strategy it’s used during the pandemic is to embrace one-stop shopping, said John Zhang, a professor of retail marketing at the Wharton School of the University of Pennsylvania. Walmart has expanded into grocery delivery, pet care and even COVID-19 vaccines.

“Go to Walmart and get everything taken care of,” Zhang said.

That is, until the world reopens and choice becomes delightful again. Mark Cohen, who directs the retail studies program at Columbia Business School, said Walmart could do more to attract discretionary spending, with exclusive clothing and beauty lines. That is something, he said, that its competitor Target does well.

“At the end of the day, you run out of appeal without having compelling assortments,” Cohen said.

Zhang said that’s the kind of thing that pulls shoppers to brick-and-mortar stores. Walmart needs to do this because online shopping will inevitably drop off when the lockdowns end. Plus, with its nearly 11,000 locations, Walmart doesn’t want all of its customers to shop online, which is more expensive for retailers.

“Picking and delivering and all those other things. Yeah, it’s less profitable,” said Matthew Hamory, managing director at AlixPartners.

Grocery delivery has especially tight margins — some retailers even lose money on it. But it’s also been a huge boost in getting people to shop at Walmart during the pandemic, which creates a dilemma.

“How do I really get the most return out of this enormous investment I have in stores? How do I use that to drive all components of my business, including online?” Hamory said.

For Walmart to maintain its current footing, it needs to keep investing even in areas that don’t make so much money. Because Walmart’s profits rely on customer loyalty.

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