In 1999, three years before reaching the top of the Fortune 500, Walmart operated nearly 4,000 stores globally and generated $137.6 billion in net sales. But for all its size and might, its online presence was just getting its sea legs. Despite efforts by certain executives to prioritize digital—detailed in Jason Del Rey’s 2023 book Winner Sells All: Amazon, Walmart, and the Battle for Our Wallets—Walmart mainly focused on its brick-and-mortar business throughout the 1990s.
The January 1996 edition of the company’s in-house newsletter provides a window into its thinking at the time: “The internet—it’s one of the hottest computer buzzwords to come along in years…It could be the next VCR or the next pet rock.”
That same newsletter explained that Walmart had a homepage where customers could see job openings and “what’s hot in the latest Walmart circular,” but it wasn’t until 2000 that the company made the leap into online shopping with the launch of Walmart.com.
- Del Rey told Retail Brew that marking 2000 as the starting date of Walmart’s e-commerce journey is “a bit revisionist” given the nascent efforts to get it off the ground in the mid- to late 1990s, but acknowledged that the really consequential moves didn’t come until the 2010s.
How then did Walmart become the e-commerce giant it is today, with online sales growing more than four times as fast as sales from physical stores? The answer is a winding 25-year journey involving spin-offs, acquisitions, and some very public strategic pivots from top brass that together nudged the retail giant into the future.
“Like a foreign country”: With all the talk of omnichannel today, it may be surprising to learn that in the early days, Walmart put distance between its online and brick-and-mortar business.
In 2000, Walmart spun off Walmart.com into a separate company with its own CEO and board of directors in partnership with Palo Alto-based venture capital firm Accel Partners. The goal, executives noted at the time, was to place the company in Silicon Valley so that it could access the best technology talent available.
“Scott says Wal-Mart’s new online model approaches the Internet as a fresh new market with totally different retailing rules—much like a foreign country,” Walmart.com CEO Jeanne Jackson wrote in the 2000 annual report, paraphrasing then-Walmart CEO Lee Scott.
However, the new site would prove a disappointment. Despite offering approximately 600,000 items, excluding food and drug products, Walmart.com generated just $28 million in sales in Q4, according to Winner Sells All. That was compared to projections of $150 million. As a result, much of its inventory had to be liquidated, and in 2001, Walmart terminated the experiment with the buyout of Accel Partners’s stake in Walmart.com.
The rest of the decade was fairly quiet as far as big moves, with the exception of rolling out in-store pick-up of online orders in 2007. It wasn’t until a new CEO came along that Walmart began the next phase of its e-commerce journey.
Getting serious: Mike Duke took over from Lee Scott as CEO in 2009—the year the company launched Walmart Marketplace for third-party sellers, setting up a key pillar of its e-commerce business and adding nearly 1 million new items to its online assortment.
Two years later, he doubled down on Walmart’s commitment to making e-commerce a crucial part of its business, voicing a more omnichannel approach to embracing online. “We can combine our stores, our systems, and our logistics expertise into one continuous channel to drive growth and serve the next generation customer around the world,” he said in a statement. “In global e-commerce, we will not just be competing. We will play to win.”
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But apparently this wasn’t enough for Duke, who expressed regret in 2012 that Walmart had not moved fast enough on e-commerce: “When I look back, I wish we had moved faster. We’ve proven ourselves to be successful in many areas, and I simply wonder why we didn’t move more quickly. This is especially true for e-commerce. Right now we’re making tremendous progress, and the business is moving, but we should have moved faster to expand this area.”
Putting it a touch more harshly, Juozas Kaziukėnas, founder of Marketplace Pulse, a research firm and data site focused on e-commerce, wrote in an email that “for a long time, it felt like there was no sense inside of Walmart that online sales was something worth investing [in]. The company operated as if e-commerce was for someone else to figure out (which turned out to be Amazon). Their biggest barrier was themselves.”
At the tail end of Duke’s tenure, however, Walmart started experimenting with same-day grocery delivery in select markets, moving from the West Coast to Denver and eventually onto the rest of the country. This service would become an essential link in Walmart’s emerging e-commerce business, but a few more steps had to be taken before it all came together.
Buying in: The turning point, Kaziukėnas wrote, was the acquisition of Jet.com in 2016. The New Jersey-based e-commerce platform and Amazon competitor listed 4.5 million products at the time of Walmart’s $3.3 billion purchase. The acquisition “kickstarted Walmart’s growth in e-commerce by bringing in a team of people solely focused on e-commerce,” he added.
Indeed, over the next few years, Walmart launched two-day shipping on more than 2 million items in 2017, and free next day delivery on many items in 2019. In the meantime, e-commerce sales started to soar, rising 33% in the first three months of 2018.
But Walmart still wasn’t happy with Jet.com, and in 2020 announced that it was phasing out the brand. The decision came after years of Walmart being disappointed with the site’s financial performance. As Del Rey outlined in a piece for Vox, Jet.com was losing money, and Walmart’s executive team was “increasingly frustrated by some of the money-losing initiatives, and sources say its leader is perturbed by the credit [Jet founder Marc] Lore’s division gets in the media and on Wall Street for the success of Walmart’s growing online grocery business.”
So once again–hearkening back to the retail giant’s first foray into launching an online business–Walmart’s e-commerce business was moved back in house.
The Covid-19 boom: It was in the wake of the pandemic that Walmart really went on the offensive, Del Rey explained. During this period, the company has expanded its delivery options, including launching its GoLocal last-mile delivery service; invested in drone delivery and autonomous vehicles; and launched its fulfillment business, to name a few.
And the investments are paying dividends: In Q3 2024, global e-commerce sales jumped 27% on the back of store-fulfilled pickup and delivery and marketplace, compared to a 5.5% increase in revenue overall.
As for why it took so long, Del Rey offered this insight: “Disrupting yourself when you’re dominant is just not something nearly any company is going to do on their own.”
This is one of the stories of our Quarter Century Project, which highlights the various ways industry has changed over the last 25 years. Check back each month for new pieces in this series and explore our timeline featuring the ongoing series.
