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Is There Some Life Left in Retail?

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Perhaps brick and mortar stores can learn to compete with Amazon in a new age for retail. Wal-Mart’s online business surged last quarter. As Amazon attempts to build out its footprint in physical stores, and Wal-Mart expands online, maybe a combination of brick and mortar and e-commerce sales will be the key to retail longevity.

In the U.S., which accounts for two-thirds of Wal-Mart’s sales, foot traffic rose 1.5% in the quarter ended April 30. That rise was supported in part by strong sales of groceries and household goods. Wal-Mart has been lowering some prices in those categories, in part to compete with a rising crop of discount grocers including Lidl and Aldi.

The average amount each U.S. shopper spent per trip declined slightly, down 0.1% “primarily due to lower sales of higher ticket items at the beginning of the quarter, as well as continued price investment,” said Wal-Mart Chief Financial Officer Brett Biggs in a conference call. Overall, U.S. sales in the first part of the quarter suffered because of a delay in federal tax-refund checks, executives said….

Meanwhile, Wal-Mart has leaned heavily into its online efforts and improved stores to compete. Over the last two years it raised store employee wages and shrunk inventory to smooth store operations. Inventory levels in existing stores fell 7.3% in the quarter.

U.S. e-commerce sales surged 63% in the first quarter, including sales from Jet.com Inc. and other recent e-commerce acquisitions. Most of the sales increase came from Walmart.com, said a spokesman. Wal-Mart bought Jet.com in September for $3.3 billion and has since bought up smaller e-commerce sites such as Modcloth, Moosejaw and ShoeBuy. Chief Executive Doug McMillon said the purchases help add to Wal-Mart’s assortment of online products, but the company won’t “buy our way to success.”

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Dick Young

Richard C. Young is the editor of Young's World Money Forecast, and a contributing editor to both Richardcyoung.com and Youngresearch.com.