At its annual investor day yesterday, the Arkansas-based retailer said it has planned annual capital expenditure of $11 billion for next year, with a majority of that cash going towards e-commerce initiatives. It spent between $1 billion to $1.5 billion last year and $1 billion in 2014 to expand its digital presence. (See also: Wal-Mart Shares Fall On Reduced Forecasts).
As part of the e-commerce initiatives, Wal-Mart is increasing the number of warehouses to service online customers to 10. At the same time, it is cutting back on the number of store openings. The company said it plans to open 55 stores next year, a drastic reduction from the 130 stores it has targeted for this year. Last year, Wal-Mart opened 230 physical stores. Wal-Mart has also made a number of acquisitions this year to bolster its e-commerce cred. For example, it bought online retailer Jet.com for $3.3 billion earlier this year. The company reported revenues of $482 billion last year. E-commerce sales accounted for 3 percent (or $14 billion) of that figure. As a point of comparison, Amazon has 40 warehouses across the country to service online customers and reported $107 billion in e-commerce sales last year. (See also: Amazon Vs. Big Retail: Investor Optimism Is Changing).
But the percentage of e-commerce sales to overall sales may change in the coming years. “The company over time will look like more of an ecommerce company,” CEO Doug McMillon told investors.
A report on Fox Business adds more detail to Wal-Mart’s efforts to transform itself. According to the report, the company is installing automated technology to streamline operations and make its warehouses more efficient. For example, it has installed automated product sorting and improved item tracking and provided warehouse workers with “smart-phone like devices on their wrists that tell them where to find a product, what box it needs to go into and even how much tape is required to seal the package.”
According to Justen Traweek, senior vice president of e-commerce operations at the company, the company’s new warehouses enable single-day delivery to 70 percent of Americans. But, he added, that the company cannot make those deliveries profitably yet. In a conversation with CNBC, Brett Biggs, the company’s CFO, said e-commerce losses would peak in fiscal 2018.