Walmart Inc. (NYSE: WMT) is losing on its big bet to challenge Amazon.com on the e-commerce front. Walmart is now expected to lose at least $1 billion this year in its U.S. e-commerce division. According to reports, the e-commerce unit is projecting losses of over $1 billion on revenues between $21-22 billion.
Walmart’s investments in the e-commerce business have become a drag on profitability. The company recently announced a major overhaul at Jet, the online shopping site Walmart purchased for $3.3 billion back in 2016. As part of the changes, Jet’s e-commerce platform will be more fully integrated into Walmart’s own business and Jet president Simon Belsham will be leaving the company in August. When e-commerce division leader Marc Lore joined Walmart from the Jet acquisition, he agreed to stay on for five years, through the fall of 2021.
One of the biggest problems facing Walmart’s e-commerce unit is its lack of e-commerce fulfillment centers. Walmart currently has about 20 fulfillment centers. For comparison, Amazon has about 110. But, building more of those fulfillment centers requires serious investment and take time to complete, serious hurdles for a cash-strapped company struggling to keep up.
The raise money, Walmart may look to sell at least one of its three recently purchased fashion brands, all three of which are unprofitable, according to reports. Walmart spent 310 million for Bonobos, $100 million for Eloquii and less than $50 million for Modcloth. According to sources familiar with the matter, Walmart is likely to sell ModCloth this year for less than its purchase price and hang onto Bonobos. Eloquii’s future is still uncertain.
The sources say that Walmart won’t make any more acquisitions of digitally native brands for at least the next year. That is, unless a deal comes along that is just too great to resist. Instead, Walmart will be focusing on incubating its own brands, an area where the company has seen considerable success lately.