Walmart (NYSE:WMT) is in a high stakes race with Amazon (NASDAQ:AMZN) with a view on controlling the global retail market. But America’s largest brick-and-mortar retailer could be in for a rough ride based on Vox’s Recode.
Walmart still far behind Amazon
For a long time, Walmart dominated the retail market. But that was before the internet revolutionized the way people buy. Amazon grew so fast selling to billions of people around the world without operating a physical store. In response, Walmart acquired Jet.com, an ecommerce startup, to spearhead its mission to share in the treasures of online retailing.
At the time of acquisition, Jet.com was growing fast. To be sure, Walmart paid a fortune to bring the budding online retailer under its wing. So far, the business is still doing well and WMT’s stock is worth 53% more than it was in 2016.
But a report by Vox paints a different picture of the goings-on at the company. Citing multiple sources, the report revealed that the performance of Jet is frustrating the management at Walmart.
Losses are mounting for Jet
The ecommerce division is said to making huge losses, which Walmart wants curbed. Notably, the projected losses for the ecommerce unit is around $1 billion based on revenues under $22 billion. As a result, pressure is mounting on the CEO and founder of the unit, Marc Lore to curb the hemorrhage.
In addition, the Walmart board is said to be pushing for a move to divest from one of the three fashion-focused brands which Jet acquired. Amongst the three: Eloquii, Modcloth and Bonobos, none is said to be turning in a profit. Therefore, Walmart would like to see at least one of the brands gone to rein in the runaway losses.
To be sure, Amazon is still dominant in the retail sector and that could go on for a while. As per eMarketer, the retail giant accounted for up to 38% of the ecommerce market in 2019 compared to 32% in 2016. On the contrary, Walmart’s online venture is just 4.7% of the market up from 2.6% in 2016.