Walmart.com assortment has over 42 million products, but only 3.5 million products are sold by Walmart. The rest are by one of the over 20,000 marketplace sellers. Starting three years ago Walmart has used the marketplace to grow the overall catalog ten times: from less than 4.5 million products in January 2015 to the 42 million products today.
According to our research Walmart first-party inventory has grown from 1.1 million at the start of 2015, to 2.6 million by January 2017, and is now at 3.6 million. At the same time the marketplace inventory has grown from 3.5 million at the start of 2015 to close to 39 million today. Walmart’s first-party merchandising strategy remains focused on the top-million SKUs, leaving the marketplace to provide the long tail.
First-party inventory now represents 8.5% of the overall catalog. A year ago it was at 10.6%, and in 2016 it was as at 15.9%, down considerably from 24.9% in November 2015. The marketplace impact has been on a steady increase, with the first-party inventory share now at an all-time low.
Home, Books, Electronics, and Auto & Tires are four biggest departments on Walmart.com in terms of products listed. Home, the largest department, has close to 12 million products. 8% of those products are first-party inventory, inline with the overall catalog. However the first-party inventory share varies considerably across departments.
Only 3% of Electronics listed for sale on Walmart.com are by Walmart itself. In Jewelry & Watches just 2% of the department is first-party - 60,000 of the 2.7 million total products. And yet some departments like Sports & outdoors and Toys are much stronger in first-party inventory.
At its annual meeting for the investment community in October, Walmart discussed the growing e-commerce business and the challenges in expanding assortment. The quality of products and merchants wasn’t always up to the standard, despite Walmart manually approving merchants before they are allowed to sell on the marketplace.
“We were adding SKUs really fast. If you remember, it has gotten to like 70 million SKUs last year. We were adding so fast that we hadn’t really kept a very high bar in terms of the quality of the SKUs and the quality of merchants on the site, so last year we took a breather. We added more than 20 million SKUs to marketplace, but at the same time we took down about an equal amount. So the overall quantity didn’t change, but the quality did. The quality is much better.”
– Marc Lore, President and CEO, Walmart eCommerce U.S.
For most of 2016 and 2017 Walmart’s focus in public was on expanding the catalog, celebrating the quickly growing number products. Implying that the growing catalog is the only missing piece to challenge Amazon. This backfired by the end of 2017 with low quality products, as Marc Lore pointed out, and the company has stopped discussing the catalog size since.
Walmart only carries a little over half - about 55% - of Amazon’s one million best-selling products, according to analysts at Cowen. This is the true challenge for Walmart. Not chasing the 550 million products Amazon has listed for sale, thanks to the infinite catalog of chaos, but acquiring the best sellers in each department.