It remains unclear if online grocery will help Walmart’s online division be profitable

Talk Business & Politics – Walmart.com continues to ring up large losses, which insiders project will be $1 billion this fiscal year. Though Walmart does not break out its online sales, the retailer has said it is taking longer than planned for the division to be profitable even with the billions already invested.

The Bentonville-based behemoth is betting big on Walmart online grocery to help level the playing field against Amazon. The company is aggressively rolling out the online grocery pickup services to more than 3,600 stores this year. The service is available in 3,100 of the retailer’s 4,500 U.S. stores and home delivery is possible from 1,600 store locations.

Walmart CEO Doug McMillon told attendees at Fortune’s Brainstorm Tech conference earlier this week that Walmart stores are the answer to Amazon when it comes to groceries.

“One of the realities of fresh and perishable food is if you don’t sell it, you throw it away or give it away,” McMillon said during his Fortune interview that was streamed online. “When you have a store environment and you have fresh or perishable food so close to people, those stores then become dual store and pick centers.”

Supply chain analyst Annibal Sodero, a professor on the topic at Ohio State University, told Talk Business & Politics that if Walmart wants online grocery to be a final answer to Amazon, it’s likely going to be disappointed. He said the growth of Walmart online grocery will be capped at some point as competitors like HEB in the South and Kroger in the Midwest already offer similar programs in markets they dominate. He said two years from now when all the Walmart stores have had online grocery the growth will likely slow as all of its grocery competitors will be offering the same thing.

Ken Cassar, vice president of research for Shoptalk, has said a reason Walmart.com’s sales are growing is related to online grocery pickup. Until Walmart blends the general merchandise site with the grocery site and allows consumers to shop one site for all their needs, the offerings and service are not as streamlined as it could be.

Marc Lore, CEO of Walmart U.S. eCommerce, told Talk Business & Politics the company is working on integrating the two sites. He expects it will be completed by the end of this year. But having that service available is just part of the challenge, as other Walmart executives have said having employees pick general merchandise items like apparel from a store is far more cumbersome than picking a grocery list.

It’s the general merchandise items that have the higher margins and have been much of the success of the Walmart supercenter concept, according to Andy Wilson, a retired Walmart executive who recently toured a local supercenter with Talk Business & Politics.

RetailWire recently asked market s in a blog post whether Walmart’s success or failure in grocery pickup will impact the rest of its challenged online business. The sentiment was mixed regarding Walmart’s big bet on grocery.

Read Full Article: It Remains Unclear if Online Grocery will Help Walmart’s Online Division be Profitable

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