E-commerce is the fastest-growing segment of retail and figures to remain so for the indefinite future. Online sales are growing by about 15% a year and now make up more than 7% of overall retail sales, and it's easy to see why that trend should continue.
Online shopping options keep getting better. Amazon.com, whichdominates the industry, is constantly pushing the envelope. In the past year, it's rolled out its Prime Now service, which delivers products in under an hour in several cities nationwide, and it's experimenting with drone delivery and other tactics to make shopping from home even more convenient. But other retailers aren't standing still. Wal-Mart Stores (NYSE:WMT) has stepped up its efforts in e-commerce, increasing its spending on the online platform and adding its Shipping Pass membership service, a competitor to Prime. In its most recent quarter, the company saw global online sales grow 16% while overall revenue was flat.
Now, Wal-Mart seems to have notched another surprising win with its mobile app. The retail giant now has the most popular app of any brick-and-mortar retailer, trailing only Amazon and eBay, according to comScore data reported by Quartz. Usage of Wal-Mart's app has grown from less than 5 million a year ago to 22 million primarily because of one significant innovation.
The power of everyday low prices
Wal-Mart has long staked its reputation and business model on everyday low prices. The company doesn't offer sales, instead pricing its items as low as possible in an attempt to generate customer loyalty. The successful execution of that strategy is one of the main reasons the company is by far the world's largest retailer.
It follows, then, that Wal-Mart attracts a price-conscious crowd, and the company noticed that its customers would come into its stores with pages of coupons and flyers from competitors to compare prices, according to Quartz. Then, management came up with a simple solution to keep those customers within Wal-Mart's ecosystem and encourage brand loyalty. It added a feature called Savings Catcher to its app, which allows customers to scan their receipt to see if any of the items purchased were available for less at competitors. Wal-Mart then gives the customers a credit for any difference, encouraging them to revisit its stores.
Price-matching has long been popular among retailers, but this is perhaps the best implementation of technology to do so. The proof of the success is in its the large number of its app downloads. Wal-Mart is also adding similar features to its app, including the ability to notify staff when customers enter a store parking lot for online pickup so they can get the order ready faster. As the company expands its grocery pickup, innovations such as the parking-lot alert will become a key differentiating factor.
The importance of omnichannel
Wal-Mart arrived late to the e-commerce game and has only one-sixth of Amazon's sales online despite being much larger overall. For Wal-Mart to gain ground on its rival, its best bet is to leverage its store footprint with the help of technology the way it's doing with the Savings Catcher and parking lot notifications. Though online sales are growing faster than physical, brick-and-mortar stores still receive the vast majority of consumer spending. Consumers clearly want services that Wal-Mart is best positioned to provide like in-store pickup of online grocery orders. Wal-Mart's expansion into this area along with innovative technology should eventually yield results.
This has been a year of regrouping for the retail giant. The company has seen profits fall as it's stepped up investments in wages and training as well as its online platform. Shares are off nearly a third as those moves have yet to gain traction. Wal-Mart is at a crossroads now, but those investments should eventually pay off. Chief above all else is the company's need to leverage its Supercenter footprint, and technology is the best way to make that happen. With more innovations such as Savings Catcher, Wal-Mart should return to growth once again.
Jeremy Bowman has no position in any stocks mentioned. The Motley Fool owns and recommends AMZN. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.