After decades of massive investments and strategic repositioning, Walmart’s e-commerce division has finally achieved profitability. This milestone, announced during the company’s recent quarterly earnings call, marks the end of a 25-year journey that began in the late 1990s.
CEO Doug McMillon called the achievement “a testament to our team’s persistence.” The retail giant first ventured online in 1999, at the height of the dot-com bubble. Back then, Amazon was primarily selling books while Walmart dominated physical retail with its supercenter concept.
“The path to profitability in e-commerce is never straight,” explains retail analyst Sarah Jenkins. “Walmart had to completely reimagine its business model multiple times over these decades.”
The journey wasn’t cheap. Walmart invested billions in building fulfillment centers, developing technology infrastructure, and acquiring digital brands. The 2016 purchase of Jet.com for $3.3 billion marked their most aggressive move, bringing in e-commerce expertise the company desperately needed.
The Federal Reserve’s recent economic outlook report highlights how traditional retailers have struggled with the economics of online selling. Shipping costs, return rates, and customer acquisition expenses create significant headwinds compared to in-store sales.
According to Bloomberg data, Walmart’s e-commerce sales have grown at a compound annual rate of 28% since 2019. The pandemic accelerated adoption of services like curbside pickup and home delivery. These services now account for over 20% of Walmart’s total sales.
Walmart’s late profitability breakthrough contrasts sharply with Amazon, which achieved consistent profits in its retail division years earlier. However, Walmart’s approach leveraged existing assets that Amazon lacked—specifically, a network of over 4,700 stores within 10 miles of 90% of Americans.
The retailer transformed these stores into mini-fulfillment centers, allowing faster delivery and cheaper shipping costs. “Their store network became their secret weapon,” notes retail consultant Mark Peterson. “Something Amazon spent billions trying to replicate.”
Financial analysts at Goldman Sachs estimate Walmart’s e-commerce division now contributes approximately $3.1 billion in annual operating income. This figure represents about 7% of the company’s total operating profits, still small considering e-commerce accounts for nearly a quarter of sales.
Walmart’s success carries important lessons for other traditional retailers. Their willingness to accept years of losses while building infrastructure demonstrates the patience required in digital transformation. Target, Kroger, and other major chains have followed similar playbooks with varying results.
The broader economic impact extends beyond retail. Walmart employs over 100,000 workers specifically for e-commerce operations, creating new job categories that didn’t exist a decade ago. These roles range from warehouse automation specialists to data scientists monitoring shopping patterns.
Supply chain improvements proved crucial to achieving profitability. Early e-commerce orders were often fulfilled inefficiently, with items shipped from multiple locations. Today, artificial intelligence optimizes inventory placement and delivery routes.
“Walmart finally cracked the code on last-mile delivery economics,” says logistics expert Daniel Martinez. “They’re delivering products more efficiently than anyone thought possible for a traditional retailer.”
The company’s Walmart+ membership program, launched in 2020 as an answer to Amazon Prime, has helped stabilize revenue and increase customer loyalty. While Walmart hasn’t disclosed exact membership numbers, industry estimates suggest around 16 million households have signed up.
Wall Street has rewarded Walmart’s patience. The company’s stock has outperformed the S&P 500 by nearly 15% over the past year as investors recognize the potential of profitable digital growth. This represents a major shift in perception, as e-commerce was once viewed as a necessary but value-destroying investment.
