Walmart took it on the chin this week after announcing a lousy forecast for 2017, but the news out of Bentonville isn’t all bad:
There are some good reasons why the drop in earnings will be so severe. The company announced it is already implementing a heavy investment in people and technology in order to develop a seamless customer experience in the future. That is good. The company is increasing wages from an average of $9 per hour this year to $10 next year. It has also added more supervision on the selling floor. About 800 sales managers, a hefty number, were added to insure better service.
Walmart’s management made it clear it is hell-bent to catch up in e-commerce sales. In order to do this it will make a hefty investment in technology. Currently, online sales amount to about $12 billion, less than 3% of total sales. This compares to Macy’s with some 8%, Nordstrom at an estimated 19%, and Neiman Marcus at about 26% of total sales. Walmart is investing in technology with the goal of delivering a seamless transactional relationship with its customers. Management expects the investment to pay back in the next three years.
The investment might take three years to pay dividends, but Walmart’s internet shopping had better improve much more quickly than that. I’ve tried their website, and it’s a little better than trying to chew off your own elbows — but really only a little.