Walmart shows signs of growing pains as it vies to attract online shoppers

Walmart reported its revenue shrank for the first time since it went public.
Walmart reported its revenue shrank for the first time since it went public.
Image: REUTERS/Lucas Jackson
We may earn a commission from links on this page.

It’s a number that’s going to give a lot of mom-and-pop shops some long-awaited schadenfreude. $3.8 billion. That’s how much money it took to make Walmart’s 2016 fiscal year one for the retail history book.

The company this week (March 30) listed in its annual report a drop in revenue of 0.7% compared to the previous year, the first time sales have not grown since Walmart went public in 1970. It’s an undesirable result for the company—long a retail Goliath that inflicted shrinking revenue on smaller brick-and-mortar retailers—as it evolves to better compete for online shoppers.

To be sure, the world’s largest retailer is still doing pretty well. In Walmart’s 2016 fiscal year, it brought in (pdf) more than $478.6 billion in sales, more than quadruple Amazon’s revenue. The result punctuates a larger narrative about the future of how people around the world shop: They are increasingly going online, and traditional brick-and-mortar retailers need to find an effective way to keep pace with digital natives such as Amazon.

The company has mostly outperformed overall brick-and-mortar retail in the US. But when you compare that growth with online retailers, it leaves a bigger question mark about how traditional shops and chains will compete in years to come.

Walmart in January announced it was ending its small-shop experiment, shuttering some 269 stores globally, including all its Walmart Express locations. It also has been been tinkering with its trademark supercenters, announcing in February it’s revamping store layouts to better engage shoppers and make its popular online order pick-up spots more prominent.

“You have to really peel the onion a few layers here, in my view, to really gauge what’s going on,” said Charlie O’Shea, lead retail analyst at Moody’s. O’Shea added that people should not overlook that Walmart spends more money each year on improvements than many large retailers make in a given year.

Company officials have said that in the long term Walmart plans to take advantage of the chain’s vast network of physical locations, and build a way for customers to use digital tools to make shopping easier, such as online order pick-up. Walmart recently spent more than $11 billion to give its website a facelift and remodel existing locations, among other things. For now, making those types of investments may not help revenue numbers, but it does show Walmart’s willingness to evolve.