Walmart reevaluating battle with Amazon

Bentonville, Ark.-based Walmart has been struggling for years to close the omnichannel gap between itself and Seattle-based Amazon by emulating Amazon’s business model. But now Walmart is struggling to come to terms with the financial sacrifices that come with investing in e-commerce. 

According to USA Today, Walmart’s $3.3 billion investment in Jet.com is the company’s latest example of attempting to follow Amazon’s tactic of losing a lot of money while in the process of building successful e-commerce infrastructure. Recent reports have claimed that the company has lost approximately $1 billion due to its U.S. e-commerce division this year, on revenue of between $21 billion and $22 billion. Walmart does not disclose these figures publicly.

Despite its reported $1 billion loss, Walmart’s multi-year investments in technology, supply chain and private brands appear to be paying off, as same store sales rose 3.4% in the quarter ended April 26, while Walmart’s e-commerce sales grew 37%. The company attributed its sales growth to its improved websites, grocery programs such as Pickup, and its growing private brand assortments.

“We're changing to enable more innovation, speed and productivity, and we're seeing it in our results,” CEO Doug McMillon said in a statement Thursday. “We're especially pleased with the combination of comparable sales growth from stores and e-commerce in the U.S.”

Although the company will continue to evolve its digital operations, it is likely to scale back spending on that front, and instead invest in more traditional areas like cutting prices in stores, according to USA Today. A tried-and-true tactic that may harm them within the spectrum of long-term opportunity.

To read the USA Today article, click here.