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Wal-Mart is banking on success in Latin America with its US online strategy


Wal-Mart is banking on success in Latin America with its US online strategy

From

Reuters

Published


13 June 2014

Fernando Madeira comes to his new job as head of Wal-Mart Stores’ online business with a reputation as an e-commerce expert after overseeing a significant increase in the retailer’s online sales in Latin America.

In his expanded role, the Brazilian business veteran faces an even more demanding challenge: He must compete with Amazon.com Inc. in the far more developed U.S. online market, where the world’s largest retailer has not yet established itself.

Wal-Mart announced Madeira’s promotion on Monday, two days after the company unveiled plans to integrate e-commerce into its extensive network of brick-and-mortar stores.

Starting next week, Madeira’s job will be to make sure this strategy works.

The goal of generating a larger share of sales through e-commerce has become even more urgent for Wal-Mart as the company struggles to revive its sales in the United States.

In the US, the company’s store sales have now fallen for five consecutive quarters.

Under Madeira’s leadership, Wal-Mart grew its online sales in Brazil twice as fast as the growth of the overall online market, according to an internal memo seen by Reuters.

Reasons for the upturn included a sharp increase in the number of products available and improved order processing – the process that begins with the order and ends with delivery.

In the U.S., Madeira will have to do more than just imitate Amazon as Wal-Mart tries to catch up.

Wal-Mart reported online sales of $10 billion in 2013, less than three percent of total sales, compared to Amazon’s online sales of $67.85 billion.

Wal-Mart expects online sales to reach $13 billion in 2014 – a growth of 30 percent. Analysts generally assume that Amazon’s online sales will grow more slowly.

According to e-commerce tracker Internet Retailer, Amazon controlled 25.8 percent of the online market share in the United States in 2013, while Wal-Mart had 3.4 percent.

Crowdsourcing and drones

Nevertheless, Wal-Mart has several advantages, including its size and widespread physical presence.

Wal-Mart is already experimenting with using trucks as pickup points for online orders and is testing a system that allows customers to order online and pay cash in stores.

The company is also exploring the possibility of crowdsourcing deliveries by finding customers in its stores who will arrange deliveries to online shoppers in exchange for discounts.

Since Amazon does not have physical stores, it does not offer any of these services.

Some of these attempts may be unsuccessful.

But they show the priority that Wal-Mart CEO Doug McMillon gives to e-commerce.

In his role as CEO of Wal-Mart’s Latin America e-commerce business, based in Sao Paulo, Madeira competed against established regional giants such as MercadoLibre Inc. and B2W Companhia Digital of Brazil.

Walmart.com Brazil became one of the largest e-commerce companies in the country after being acquired by Madeira in 2012.

Traffic quadrupled as the number of online sellers tripled to 1,000 in 15 months and consumers used a redesigned website.

Madeira, who Wal-Mart declined to interview, will continue to oversee Latin America from San Bruno, California, where Wal-Mart has its online headquarters.

However, Amazon is not sitting idly by.

The online retailer has started grocery delivery in Seattle and Los Angeles and plans to use drones to deliver packages to customers faster and set up a marketplace for local services.

And both Wal-Mart and Amazon face strong competition from Chinese internet giant Alibaba Group Holding Ltd, which launched its first online shopping portal in the United States on Wednesday.

“Wal-Mart appears to be embracing change more quickly than in the past and more quickly than one would expect from a retailer the size of Wal-Mart,” David Schick, an analyst at Stifel Nicolaus, wrote in a note.

“(But) Wal-Mart’s sheer size and inertia mean it takes a lot for words about change to translate into a return on investment.”

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