(Bloomberg)—Wal-Mart Stores Inc.’s e-commerce chief said the world’s biggest retailer still has plenty of ground to cover as it expands its online business in the face of fierce competition from digital leaders like Amazon.com Inc.
“There are certainly areas where we are playing defense, and we’re behind and need to catch up,” Marc Lore, chief executive officer of Wal-Mart’s U.S. e-commerce business, said Wednesday at the Bloomberg Breakaway Summit in New York. “One example is the long-tail categories that we’re going after with acquisitions.”
Wal-Mart is No. 3 in the just-released Internet Retailer 2017 Top 500; Amazon is No. 1.
The term “long-tail” refers to the seemingly endless assortment of products that online retailers can offer, compared with the shelf-space constraints that force physical stores to focus on a more limited variety of top-selling items.
People are changing the way they shop and companies that are able to adapt will do well and flourish
Wal-Mart put Lore in his current post after buying his company, Jet.com, for $3.3 billion in September. Since then, the 45-year-old Lore has rolled out free two-day shipping for orders more than $35, expanded the online grocery business, and acquired brands like Shoebuy.com, outdoor retailer Moosejaw and women’s apparel seller ModCloth. Online sales grew 29% over the Christmas holiday quarter, helping the retailer’s same-store sales top estimates.
Wal-Mart is also playing offense, Lore said, by offering discounts on 1 million online items if customers agree to pick up the goods at one of its 4,700 stores. The program takes advantage of the retailer’s nationwide network of stores and its 6,700-strong trucking fleet.
“Our cost to ship it to the store is 75 cents a box, but to ship it to your home, it’s $5 dollars,” Lore said.
The moves are meant to widen Wal-Mart’s online assortment and close the gap with Amazon, which now accounts for 51 cents of every dollar spent on online retail thanks to its broad product offering and Prime membership benefits, according to Macquarie Research. Lore sold his first startup company, Quidsi, to Amazon in 2011, and worked there for another few years before leaving. He said Amazon didn’t invest enough in growing Quidsi, leading to its March decision to shut it down.
“The business we built there was about assortment—diapers and dog food. And to make that work, you have to build out the long tail,” he said at the conference. “After I left, they sort of stopped. That was probably not a smart strategic move.”
Asked about the struggles of mall-based retailers like Sears Holdings Corp. (No. 19) and Macy’s Inc. (No. 6), Lore said the retail sector overall is “still fairly healthy” but that some bricks-and-mortar brands might not survive the current environment of steep discounting and online encroachment.
“There’s a chance that we will see some definitely not make it,” he said. “It’s not easy to change and adapt when things are moving really fast—you have to stay on top of it, and not everybody is. People are changing the way they shop and companies that are able to adapt will do well and flourish. Those that don’t, won’t.”