Ecommerce Still Hot, Rest of Retail Stagnates. Walmart US Online Sales +22%, Credits

Part of retail has been sheltered from ecommerce, but changes are underway.

By Wolf Richter for WOLF STREET.

Ecommerce sales in Q1 jumped by 8.6% year-over-year, to a record $289 billion seasonally adjusted. The rest of retail trade sales, not including ecommerce, ticked up only 0.3% to $1.53 trillion, according to data from the Census Bureau today. For the four-quarter period, ecommerce sales rose to $1.12 trillion.

Over the four years since the start of the pandemic, ecommerce sales have exploded by 90%, while the rest of retail trade sales (not including ecommerce) have increased by only 26%.

Quarter to quarter, ecommerce sales rose by 2.1% from Q4, seasonally adjusted, while the rest of retail trade sales, without ecommerce, fell 0.5%.

The share of ecommerce sales rose to 15.9%, the highest since the lockdown miracle of Q2 2020, as ecommerce continues to eat an ever-bigger slice of the retail pie:

The rest of retail trade sales without ecommerce has close-to-stagnated for nearly two years, after the pandemic spike, despite inflation and population growth. In Q1, sales rose only 0.3% year-over-year to $1.53 trillion, seasonally adjusted.

In a moment, we’re going to get to Walmart – the second largest ecommerce retailer in the US, but far behind Amazon – which reported earnings yesterday. Ecommerce sales at Walmart US soared by 22%, and without ecommerce sales, comp sales would have inched up only 1%, reflecting reality on the ground:

Part of retail has been sheltered from ecommerce attacks, but changes are underway:

• Gas stations (for obvious reasons)
• Food and beverage stores (but losing some ground to online sales)
• New-vehicle dealers (protected by state franchise laws except for Tesla and a few EV startups)
• Used vehicle dealers (still to some extent, because many people want to test-drive a used vehicle before buying).

Changes are coming, but they’re slow. Gas stations are slowly losing ground to EVs. People are becoming more open to buying groceries online. New vehicle dealers are protected from ecommerce competition by state franchise laws, but Tesla found a way around it in a majority of states and can sell direct to consumers in those states, while other EV startups are also trying to get around the state franchise laws. Used vehicle sales have already begun to migrate to ecommerce, with all the largest used vehicle dealers growing their ecommerce sales, including used-vehicle dealers that are strictly online.

What Walmart said about ecommerce.

Walmart US ecommerce sales jumped by 22% in Q1, Walmart reported yesterday in its quarterly results.

But comparable sales, which include ecommerce, rose 3.8%. Ecommerce contributed 280 basis points to the 3.8% growth, Walmart said. In other words, without its booming ecommerce sales, comp sales would have grown only 1.0%.

What’s working at Walmart’s stores are grocery sales. Walmart has become the largest grocery store in the US. Without food sales, and without ecommerce sales, Q1 comp sales at Walmart US would have likely declined.

“When I think about the headlines from the quarter, what goes through my mind is, first, the ecommerce growth. I think the progress we’re making on convenience for customers is a big deal, and that’s happening through our store fulfillment as well as through fulfillment centers,” CEO Doug McMillon said during the earnings call (transcript via Seeking Alpha).

“The categories that are really strong that are standing out is apparel and fashion online,” Walmart said during the earnings call. This might be a surprise to many who thought that apparel and fashion would never work online – but now buying apparel and fashion online is standard for many people.

“More often, our customers are finding what they’re looking for when they shop our app or site. Ecommerce penetration is up in all our markets,” Walmart said.

Ecommerce sales were also credited with attracting higher-income people to spend money at Walmart. The theme Walmart hammered home for ecommerce was “convenience.” The word “convenience” came up 10 times during the earnings call. The executives hammered at it every chance they got. Ecommerce is all about convenience – and that has a lot of value for higher income people.

“If you look at what’s happened historically, people with higher incomes have shopped Walmart. They’ve just been selective in the categories they buy and the items they buy. So if we offer them the right items at the right prices…, they’ll respond to that. And so, as we’ve been able to expand our assortment online, we can appeal to more people. And then you layer on the convenience dimension and you get a good outcome,” Walmart said.

“In terms of what we’re doing to be more attractive to that higher income household, this is really the story or the word we’ve been using here, is convenience. We are not just a play for value anymore,” Walmart said.

“We also introduced on-demand early morning delivery to customer doorsteps as early as 7 a.m. and as quickly as 30 minutes…. In Walmart U.S., over the last 12 months, 4.4 billion items were delivered same or next day, with about 20% of those delivered in under three hours. Delivery times are getting faster, and the cost of delivery is coming down at the same time,” Walmart said.

“We talked about the number of units that we’ve shipped in the last 12 months, which is on par with any ecommerce player in the world. That shows that customers are coming to us…. And convenience matters to someone irrespective of what your payback is, irrespective of what your income level is,” Walmart said. Walmart figured out ecommerce.

Enjoy reading WOLF STREET and want to support it? You can donate. I appreciate it immensely. Click on the beer and iced-tea mug to find out how:

Would you like to be notified via email when WOLF STREET publishes a new article? Sign up here.