Walmart isn't keeping up in a category that will determine the future of retail. As Target has grown its e-commerce business, Walmart's growth is slowing, The Motley Fool notes.
In the past two years, Walmart's e-commerce growth has steadily dropped. The company reported growth of 8 percent in its most recent quarter, compared with 22 percent in last year's fourth quarter and 30 percent two years ago.
Target, by comparison, grew its e-commerce business 34 percent in its most recent quarter. The company's growth has been consistent in the past few years, with digital sales growth of at least 20 percent a quarter for the past year.
Walmart's lowly position isn't from lack of trying. In October the company announced it would invest $900 million in its web development, with plans to spend $1.1 billion in the coming year, working to expand online grocery and scale its online assortment.
While that is a major investment, Target is planning on spending even more, announcing in an analyst call that it planned to spend $1.8 billion this year and $2.5 billion next year on supply chain and technology.
Many of Walmart's previous e-commerce innovations have simply failed to entice customers. The retailer's digital holiday sales failed to match up with the online deals at Target or Amazon (which achieved over 15 percent revenue growth in product sales in the quarter).
Walmart's Shipping Pass service, which offers unlimited three-day shipping for $50 a year in test markets, is nowhere near the swiftly growing two-day shipping service Amazon Prime in terms of popularity. Walmart charges non-Shipping Pass members for shipping on orders over $50, while Target offers free shipping on orders over $25.
How can the company compete? In addition to figuring out a way to persuade customers to shop for groceries online and expand e-commerce offerings, the key to digital sales seems to be linking them with the traditional shopping experience.
"We're improving our stores, adding critical capabilities, and deepening our digital relationships with customers as we work to become the first to deliver a seamless shopping experience at scale," CEO Doug McMillon said in February in the company's most recent earnings call.
The "seamless" combination of different shopping channels is one that Target has also established as a major goal. Even Amazon is dabbling in the brick-and-mortar retail business, with a physical store opening in Seattle.
One way that Walmart hopes to stand out from the competition is its mobile wallet, Walmart Pay, which the company launched in December.
"Walmart Pay is the perfect example of how our app gives customers a seamless experience that merges digital and physical to make shopping faster and easier," Neil Ashe, Walmart's president of global e-commerce and technology, said in the February earnings call. "It gives customers a reason to form a digital relationship with Walmart."
When thinking of the future of shopping, mobile is a crucial connector for online and in-store retail. While smartphone traffic makes up more than half of all online traffic, mobile accounts for just 29 percent of all online sales. When it comes to grocery, the opportunity to grow mobile is even greater, with a disproportionate amount of grocery e-commerce sales coming from mobile devices, compared with categories like electronics, apparel, or books.
It’s too early to tell whether Walmart Pay will gain traction, but, if it does, it could drive significant app downloads and mobile purchases for the retailer. Perhaps more important, it could help establish Walmart as a company with the truly "seamless" shopping experience all retailers are aiming for in 2016.