Walmart's e-commerce efforts have paid off with a boom in online grocery orders. When it comes to home and fashion, though, the company is still looking for the winning formula.
Mark Lore, president and chief executive officer of Walmart's U.S. e-commerce business, said Tuesday the retailer is committed to offering customers an appealing mix of online goods. That's why, he said, it acquired brands like Bonobos.
"These aren't just private label brands," he said. "They have a soul, a social media following. They give us the DNA to create these digital native brands in-house."
Lore was among the Walmart executives who spoke at the company's investor day in New York about how the company is weaving together its brick-and-mortar stores with its apps and website. Walmart has spent billions of dollars to build up its online business. It bought Jet.com — a company that Lore founded — for $3.3 billion in 2016. Since then it's bought digitally native clothing and home brands, including menswear maker Bonobos and plus-size women's clothing line Eloquii.
Walmart CEO Doug McMillon also touted the company's strong portfolio of brands, but said the company wants to sell more apparel and home goods. He acknowledged the company's heavy spending to build up its e-commerce business.
"We've invested a lot to do it, but we're now in a position to play offense in an omnichannel game," he told investors and analysts. "We've got a strong set of chess pieces to work with."
Walmart is still learning how to predict and adapt to customers' preferences, particularly with apparel. For example, McMillon said stores didn't have the right mix of apparel over the Christmas season. He said its clothing "looked like red and green" and had too much at the low end of price points.
McMillon said one of Walmart's greatest e-commerce assets is its huge number of stores, which not only power in-store sales but act as fulfillment centers for online orders.
"There's a Walmart within 10 miles of 90% of Americans, within five miles of 70% of Americans and fully half the U.S. population is within just three miles of a Walmart," he said. "That's a unique position, and we're taking advantage of it."
A customer who shops in Walmart stores and through the company's app or website spends two times as much as those who spend in stores only, he said.
Lore said online grocery orders give the company another avenue to sell fashion and home goods. He said there's little additional cost to delivering those items if a customer already has groceries in their virtual basket.
Along with buying e-commerce brands, Lore said Walmart has had success with homegrown labels. He pointed to Allswell, a homegrown mattress brand. He said it began with a small amount of capital, and it is approaching an $100 million brand this year. He did not disclose the amount Walmart spent on its launch.
"Allswell was the aha for us," he said. "We realized that we can create these brands and incubate them in a way that makes them successful across stores and online. We are integrating our digitally native brands like Allswell into the company and we are going to keep moving in that direction."
Some of its exclusive apparel brands have started online and later arrived to stores. He pointed to Sofia, a clothing line by actress Sofia Vergara, and the company's fast fashion brand, Scoop, which were digital only at first.
"We see that trend continuing," he said. "There are opportunities for branded assortment that we create that's proprietary going across dot-com and stores."
Some of Walmart's other e-commerce efforts have struck out. The retailer recently shut down Jetblack, a membership-based service aimed at affluent, busy families who lived in New York. Customers could text an order for any item, except fresh food, and have it delivered to their home.
Lore said the company learned more about customers' shopping habits through Jetblack. He said he expects a growing number of shoppers to use texting and voice to make purchases, so Walmart is testing new ways to allow them to shop that way and get to know their preferences.
He said Jetblack members used the service nearly 10 times per week. Now, he said, Walmart wants to add similar shopping options "in a way that's scalable and sustainable."
He said Walmart will continue to add new technology that encourages purchases, too. For example, he showed a demo of Insperience. The virtual reality feature helps customers see how a couch or other home decor would look in their living room. He said it will be available in some of its stores soon.
Ahead of the investor day presentation, Walmart reported disappointing fourth-quarter earnings, which it attributed to lower demand for toys, video games and apparel over the holiday season.
Its fourth-quarter results and fiscal year 2021 forecast fell short of analysts' expectations, and it warned its supply chain in China could be hurt by the coronavirus outbreak.
E-commerce sales in the U.S. grew by 37% last year, but the business is still not profitable. Walmart anticipates e-commerce sales growth in the U.S. will moderate to 30% in fiscal 2020. McMillon said global e-commerce sales are on track to be about $50 billion this year.
"The losses we're experiencing today are necessary to build a business model that can compete and avoid being outmixed," McMillon said.