The Bentonville, Arkansas-based discount retailer on Thursday reported online sales growth of 8 percent in its fiscal 2015 fourth quarter (ending Jan. 31) and 12 percent for all of 2015. That's well under Amazon's 22 percent fourth-quarter growth and 20 percent gain last year. Concerns about Walmart's e-commerce business are one of the reasons the company's shares have slumped more than 25 percent over the past year.
Many experts are doubtful that Walmart will ever catch up to Amazon. Global sales rankings by Internet Retailer, a trade publication, show Apple (APPL) ranked second behind Amazon in recent years, with the retailer in third.
"The growing popularity and convenience of Amazon Prime, now in 50 million homes, makes it less and less likely shoppers would go anywhere else but Amazon," said Stefany Zaroban, director of research for Internet Retailer.
Walmart's e-commerce sales were about $15.6 billion in 2015, accounting for about 3.2 percent of its overall sales, among the lowest percentages of major retailers. Dan Toporek, a company spokesman, attributed the results on sluggish performance in key foreign markets such China, the U.K. and Brazil.
Walmart has tried to create a high-tech vibe in recent years, adding technologists and data scientists among others. The headquarters of its e-commerce business, which has a staff of about 3,500, is in Silicon Valley. The retailer has also made more than a dozen e-commerce acquisitions, though it hasn't disclosed the amount it has spent.
Speaking on Thursday's earnings conference call, Neil Ashe, head of Walmart's e-commerce business, struck an optimistic tone, noting that the company saw a dramatic spike in orders on Thanksgiving and Cyber Monday compared with a year ago. It also has high hopes for the expansion of its grocery delivery business and its Walmart Pay app.
Like Amazon, Walmart has built a network of fulfillment centers to process e-commerce orders and has expanded other services, such as allowing customers to order products online and pick them up later in its stores. Try as it may, though, Walmart will find Amazon difficult to beat at its own game.
"Walmart doesn't have the assortment, the fast shipping or the innovative culture that Amazon has," said Sucharita Mulpuru-Kodali, an analyst with Forrester Research. "Walmart is certainly trying as best they can, but they have a lot of legacy systems and a big-company culture, which are difficult to change."
Shares of Walmart fell 3 percent to $64.12 on Thursday as Wall Street reacted negatively to its earnings report. Rising costs -- including its decision to raise employee wages -- depressed profits, which fell 7.9 percent in the quarter. Per-share profit excluding some items was $1.49, topping analysts' estimates of $1.44. Revenue, though, fell to $128.7 billion, missing forecasts.
According to retail consultant Howard Davidowitz, one reason for Amazon's success is that CEO Jeff Bezos is following the aggressive pricing strategy made famous by Walmart's late founder Sam Walton, who vowed never to be undersold. The retailer, however, has lost its pricing edge in recent years to a variety of rivals including Amazon, Target (TGT) and discount food retailer Aldi, according to Davidowitz.
"Jeff Bezos is Sam Walton," said Davidowitz. "That's who he is. He believes in exactly the same principles. ... Sam Walton was determined, determined to underprice everybody and he did."