Walmart's e-Commerce Acquisition Spree: Toward Online Success or Existential Crisis?
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Case Code: BSTR537 Case Length: 15 Pages Period: 2016-2017 Pub Date: 2018 Teaching Note: Available |
Price: Rs.500 Organization: Wal-Mart Stores Inc. (Walmart) Industry: Retail Countries: USA Themes: Business Model, Growth Strategy, M&A, E-Business Strategy |
Abstract Case Intro 1 Case Intro 2 Excerpts
Excerpts
Walmart-Amazon Rivalry
Amazon was a young fledgling company in 1999 with annual revenue of US $1.6 billion, while Walmart’s revenue was around US $138 billion. In 2012, Walmart’s revenue was about US $444 billion, estimated as 16 times the revenue of Amazon at that time and equal to 3% of the US economy – such was the strength and stand of Walmart in the US retail industry. But market analysts pointed out that gradually, due to increased internet usage, online retail growth had surpassed Walmart’s traditional retail growth (Refer to Exhibit – II for US E-commerce Sales from 2012-2016). This came as a huge blow to Walmart, which till then had been focusing mostly on increasing the number and scale of its physical outlets and had failed to leverage Walmart.com. Meanwhile, Amazon, which had been constantly growing its online operations, benefitted from the shift in customers’ preferences and behavior...
E-commerce Acquisitions
Walmart’s e-commerce acquisition spree in the consumer space started in August 2016 with the acquisition of Jet, an e-commerce marketplace predominantly known for its pricing scheme, which offered pricing adjustments like buying more items at once, opting out of free returns, and purchasing items from the same distribution centers so as to make it less expensive for the company to collect and ship items...
What's in these Acquisitions for Walmart?
Walmart had faced sluggishness in its online business for several years, but the series of acquisitions it had made from 2016 had brought in a lot of positivity and growth in its digital sales, which, according to a few market experts, could actually become a cause for serious concern for Amazon...
Potential Challenges
Walmart chose to buy out multiple specialized e-commerce sites as a quick solution to improving its e-commerce business. Many analysts lauded these rapid acquisitions which would offer padding to the retailer by providing an immediate, well-established online capacity in multiple segments. However, some market experts questioned the credibility of these acquisitions...
Acquisition Spree - is it Worth the Investment?
A prominent factor of Walmart’s acquisition strategy was that the online stores it bought would contribute their sales directly to Walmart.com, while operating under their own names. This model would guarantee that Walmart realized the benefit from these online sites’ operations while ensuring that the loyal customers of those acquired firms did not slip away...
Exhibits
Exhibit I:Walmart’s Net Sales Worldwide from 2006 to 2017
Exhibit II: US E-Commerce Sales and its Share of Total Retail from 2012 to 2016
Exhibit III: Top 25 US Retailers Ranked by Online Sales
Exhibit IV: Leading Product Categories Bought Online by Internet users in the US as of June, 2016 (by Gender)
Exhibit V: Income Statement of Walmart from 2014-2017
Exhibit VI: Balance Sheet of Walmart from 2014-2017
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