How Walmart Turned Challenges in to Opportunities in Digital Age?

Walmart, one of the largest retailers globally, built its success on offering a vast array of products at low prices through its massive brick-and-mortar footprint. However, by the early digital era, Walmart faced serious challenges as digital competitors like Amazon grew rapidly, revolutionizing consumer shopping behaviours with e-commerce, convenience, and personalization. Walmart had to transform its process ?and increase capability to avoid becoming obsolete.

Background

Founded in 1962, Walmart operates one of the world’s largest retail networks, with over 10,500 stores in 20+ countries. In the early 2010, competition from Amazon and changing consumer behaviour forced Walmart to rethink its strategy to maintain its leadership position.

Challenges Faced

E-Commerce Competition:

1. Amazon accounted for 49% of US e-commerce sales in 2018, while Walmart's share was just 4%.
2. Consumers expected same-day or next-day delivery options, which Amazon excelled at.

Declining In-Store Traffic:

1. The 2010–2015 period saw a 6% decline in foot traffic across Walmart stores, influenced by the convenience of online shopping.

High Operational Costs:

1. Operating large stores (up to 180,000 sq ft per supercenter) resulted in significant fixed costs, which became harder to offset with lower footfall.

Fragmented Digital Infrastructure:

1. Before the transformation, Walmart’s website lagged in product variety and user experience, impacting its competitive edge.

Strategies and Actions Taken

1. Investing in E-Commerce

• Acquisition of Jet.com (2016): Walmart spent $3.3 billion to acquire the e-commerce company Jet.com, adding 2 million new customers in its first 12 months post-acquisition.
• Online Sales Growth: Focused on expanding its product assortment and improving delivery capabilities, Walmart achieved 40% growth in e-commerce sales in 2018, followed by a 79% increase in 2021 (boosted by the pandemic).

2. Strengthening Omnichannel Retail

• Order Online, Pick Up In-Store (BOPIS): By 2022, Walmart expanded BOPIS to over 4,000 stores in the US. 20% of all Walmart shoppers used BOPIS, leading to increased footfall at physical locations.
• Walmart+ Membership Launch (2020): Walmart introduced a subscription model to rival Amazon Prime, offering free delivery, discounts on fuel, and mobile checkout. Within its first year, Walmart+ had over 32 million subscribers, contributing to repeat customer loyalty.

3. Harnessing Technology

• AI & Robotics in Supply Chain: By 2023, Walmart had automated 25 distribution centers using machine learning algorithms and robotics, cutting labor costs by an estimated 20–30% and improving order accuracy by 40%.
• Mobile App Innovations: Over 80% of Walmart customers used the mobile app to shop, track orders, or find deals, making it a key driver for digital engagement.

4. Partnerships and Marketplace Expansion

• Walmart’s third-party marketplace grew exponentially, with gross merchandise volume (GMV) hitting $43 billion in 2021, a growth of 57% YoY.
• Collaborated with third-party services like DoorDash for last-mile delivery, reducing logistics bottlenecks and scaling up coverage.

5. Optimizing Supply Chain and Logistics

• Walmart introduced next-day delivery on over 200,000 products for 75% of the US population, countering Amazon’s Prime offering.
• Automation and Predictive Analytics: Walmart reduced inventory shrinkage by over $300 million annually through AI-powered demand forecasting and RFID technology.

Results and Successes

E-Commerce Surge

1. In FY2022, Walmart’s global e-commerce revenue reached $73 billion, up from $15 billion in 2015.

Online Grocery Leadership

1. Walmart became the largest player in the US online grocery market, capturing 33% of the market share in 2022, compared to Amazon’s 23%.

Increased Profitability

1. Leveraging its omnichannel model, Walmart achieved $611 billion in total revenue in FY2023, a YoY increase of 6.7%.
2. Walmart U.S. operating income grew by 12.3% in FY2022, driven by e-commerce expansion and supply chain efficiencies.

Market Share Resilience

1. Despite growing competition, Walmart's US retail market share stabilized at around 10.2% in 2023.

Customer Loyalty

1. Walmart+ membership directly contributed to a 25% rise in digital basket sizes, underscoring improved customer loyalty.

Lessons

1. Turn Brick-and-Mortar into a Strategic Asset

Walmart transformed its stores into mini-distribution hubs for fulfillment, turning a fixed-cost liability into an e-commerce enabler.

2. Capitalize on Scale

Its sheer operational scale allowed Walmart to negotiate favorable terms with suppliers, supporting competitive pricing while funding digital investments.

3. Data-Driven Decision Making

Walmart embraced AI, predictive analytics, and machine learning to make its inventory management, marketing, and supply chain future-ready.

4. Customer-Centric Transformation

Walmart tailored its innovations to enhance convenience, creating seamless experiences like curbside pickup and next-day delivery.

Conclusion

Walmart’s evolution from a traditional retailer into an omnichannel powerhouse highlights how established businesses can thrive by embracing digital transformation. By strategically addressing its challenges with innovative solutions backed by data, Walmart has positioned itself as a key player in the future of global retail.