Walmart's CEO revealed what the company's e-commerce business needs to do to be more profitable
- Walmart wants to improve profitability for its online business, CEO Doug McMillon told analysts on its latest earnings call on Tuesday.
- To do so, McMillon said, Walmart needs to add more items in categories like home and apparel, which are more profitable to sell online than some other categories.
- Walmart is also adding brands to its website and using Jet.com to attract brands that wouldn't typically partner with Walmart itself.
To compete online, online shops are quickly realizing that assortment is king.
Walmart wants to improve profitability for its online business, CEO Doug McMillon told analysts on its latest earnings call on Tuesday.
That's despite reporting 40% US e-commerce growth for the year.
"The thing that's taking longer than I would have guessed is to build that merchandise assortment - including the brands we're trying to add - to a place where we got a repeatable healthy mix of business online," McMillon said in response to an analyst's question about what was taking so long to get there.
"We're pedaling fast trying to make that happen, and disappointed that it's taking as long as it is."
McMillon says the key to achieving profitability online is "mix - and that mix has got to generate a customer experience that drives repeat business."
It's that assortment of items that keeps customers coming back and buying more thins. But that mix of items should also include online orders with higher margins.
Read more: Anybody can now offer free 2-day shipping on Walmart.com - and Amazon should be worried
Walmart is now "trying to build an apparel, home, hardlines business that brings customers back and generates a positive contribution margin to the basket," McMillon said.
The company is making headway on this goal by creating new brands for this express purpose. In apparel, Walmart has launched new clothing brands with star names like Ellen DeGeneres and Sofia Vergara. In home goods, it's launched a new online-only brand called MoDRN.
But for Walmart, e-commerce is bigger than just Walmart.com. Jet.com, its site geared toward urban millennials, has also been building assortment by partnering with big brands like Nike and Apple that would not typically partner with Walmart.com.
McMillon said he is "pleased with the role [Jet's] playing attracting new brands," noting it is an "opportunity to learn and try new items that aren't available on Walmart.com."
Still, Walmart's ongoing efforts to grow its online platform to go toe-to-toe with Amazon might keep it from making its e-commerce business more profitable in the short term.
"As we outlined in October, we expect our losses in e-commerce to increase this coming year, reflecting investments in infrastructure, people, online grocery and Store No. 8 initiatives," Walmart CFO Brett Biggs said during the call.
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