The retailer risks falling further behind Amazon

Walmart’s  WMT 1.12%  sales and shopper traffic might be on the upswing again, but the retailer’s quarterly report on Tuesday put into relief a potential Achilles’ heel: e-commerce is not contributing enough to its turnaround.
The retailer announced that its U.S. comparable sales rose 1.5% last quarter, the fifth quarter in a row of growth. And Walmart saw an even bigger jump in the number of shoppers coming into its stores. But global e-commerce, the bulk of which is in the U.S., grew by only 10%, a much smaller rate than in any preceding quarter this fiscal year. And, perhaps of greatest concern, that clip is well below Amazon.com’s  AMZN 1.47%  23% growth last quarter. (Amazon has project growth of as much as 25% in the current holiday season quarter.)
Walmart executives said e-commerce accounted for 0.15% of its sales growth for the quarter, below the 0.3% contribution of a year earlier. All the while, the retail giant spent billions to build up its e-commerce firepower.
“E-commerce sales and traffic were softer than we would like,” Wal-Mart Stores CEO Doug McMillon conceded in a pre-recorded conference call.
Last month, Wal-Mart shares suffered a big sell-off after executives made investors nervous with forecasts of much lower profit next year on account of its big investments in e-commerce and the raises it gave its workers.
It’s clear those investments are helping Walmart make progress in the e-commerce wars: in the third quarter, Walmart sped up the rollout of its free pickup service for online groceryorders, bringing the number of stores offering that service to 140 in 25 different markets. It introduced a mobile check-in service that allows shoppers to alert store workers when they are ready to come pick up an online order. And it also introduced a wish list on its app ahead of the Christmas period.
McMillon has said repeatedly that Walmart’s 4,500 U.S. stores give the retailer a network of distribution points that purely online stores (read, Amazon) could only dream of. Indeed, McMillon on Tuesday said that shoppers who order groceries online and pick them up in stores spend 50% more money than those who make purchases in-store. What’s more, Walmart added to its firepower recently by opening a new 1-million square foot facility in Atlanta, its fifth such fulfillment center to handle online orders. Walmart stores are also largely equipped to handle in-store pickup of online orders.
But if Walmart is to dominate e-commerce as it dominates brick-and-mortar retail—according to eMarketer, Walmart’s e-commerce sales in the last month were $13.2 billion, versus $71.8 billion for Amazon—it needs to do much better than 10% quarterly growth.