How Walmart became a tech giant—and took over the world

Doug McMillon began his career at Walmart as a teen in the 1980s loading trucks in an Arkansas warehouse. Back then Walmart warehouses were small, noisy, chaotic places. Staff hauled crates off trailers and sorted items by hand.

How things have changed. The newest Walmart warehouses are vast hangars filled with conveyor belts, computer screens and robotic arms that silently pick and pack products. Artificial-intelligence (AI) tools ensure pallets are loaded onto trucks in such a way that they can be unloaded in stores with ease: fragile items at the top, urgent products at the front and things that go in the same aisle together. A few people lend the machinery a hand. If it sounds familiar—a lot like one Seattle-based tech giant—it should.

When Mr McMillon was appointed chief executive just over a decade ago Walmart was in peril. Amazon, an online bookseller turned “everything store”, was upending retail. Its endless variety and doorstep delivery made Walmart’s vast out-of-town stores seem like relics of a bygone age. Walmart’s same-store sales were in decline; profits were cratering.

Today, however, the retail colossus is resurgent. With $680bn in revenue last year and 2.1m workers, it is the largest company in the world on both measures. In America it takes in a tenth of all retail spending, excluding cars, and a quarter of the outlay on groceries. Mr McMillon has reinvigorated the company by reinvesting profits into new technologies while using its bricks-and-mortar infrastructure to beat Amazon at its own game.

Investors have rewarded Walmart handsomely. In the past year its market capitalisation has soared by over 50%, to more than $750bn. At nearly 40 times earnings, it is now valued at a higher multiple than Alphabet, Amazon, Apple, Meta or Microsoft (see chart 1). In its quarterly results on May 15th Walmart reaffirmed that it expects its sales this year to grow at a comfortable rate of 3-4%, with operating profits rising faster still, even as Donald Trump’s chaotic trade war disrupts global supply chains and squeezes other retailers. Can anything hold the giant back?

In 1962 Sam Walton—a trucker-capped, pickup-driving penny-pincher—founded Walmart as a general-merchandise retailer with a business model based around a simple flywheel. Keep costs low, pass savings on to customers, win market share, harness scale to further lower costs—and listen as the cash registers sing. Over time it added groceries and opened vast supercentres, where shoppers could buy everything from guns to butter, pick up prescriptions at a pharmacy and get their tyres checked at a garage. As Carl Mela of Duke University puts it, Walmart was “the original everything store”.

Today the company is spinning a new flywheel, centred on e-commerce. Dan Bartlett, Walmart’s corporate-affairs chief, admits that it “missed the first wave of e-commerce” around the turn of the millennium. Its strength has always been its physical footprint. Walmart has some 5,000 stores across America; 90% of Americans live within ten miles (16km) of one.

Mr McMillon has put that infrastructure to work to boost online sales. Supercentres, which on average stock 120,000 discrete products, have been turned into distribution hubs. Warehouses built to serve shops now deal with online orders, too. With a third-party marketplace much like Amazon’s, Walmart has expanded its online range to hundreds of millions of products. As well as handing the retailer a cut of sales, many merchants on the platform pay extra to use its logistics network. Morgan Stanley, a bank, reckons Walmart takes 12% of third-party sales plus an average 8% for storage, packing and delivery.

Walmart’s American e-commerce unit made over $100bn in sales last year, according to eMarketer, a research firm (see chart 2). Although it remains a distant second to Amazon, with $480bn of e-commerce sales in America in 2024, Walmart is gaining ground: its online sales are growing at around 20% a year, twice as fast as its rival’s. In the tricky category of grocery deliveries—which require a temperature-controlled supply chain and speedy distribution—it already has the lead.

E-commerce has also opened up new revenue streams. Walmart has an Amazon-Prime-like membership programme, called Walmart+, which provides customers in America with perks including free delivery for $8.17 per month. Combined with Sam’s Club, its answer to Costco’s members-only stores, Walmart made $3.8bn from membership programmes in 2024, double the figure five years earlier.

Meanwhile, the trove of proprietary data Walmart collects through e-commerce allows it to target ads at shoppers and check whether they buy what is marketed to them. Suresh Kumar, the firm’s chief technologist, calls it “closing the loop”. Walmart has lined its shops with screens playing ads. The Walmart app is plastered with them, too. And Walmart’s recent acquisition of Vizio, a maker of smart televisions, means that the company can also show viewers ads on tv.

All told, Walmart’s advertising unit generated $4.4bn in revenue in 2024, up almost 30% on the previous year. That is fun-sized compared with the rest of its business. But given the operating margin on ad sales is around 70%, Morgan Stanley reckons they made up 10% of Walmart’s operating profit last year, and will account for 16% by 2027.

Walmart has been pouring its profits back into its reinvention. The retailer was once a pioneer in deploying new technologies. When computers began to transform business in the late 1960s Walton signed up to a computer class at IBM. Shortly after that his company set up the largest private-satellite system in the country to connect its stores. Today it is spending big to make up for lost time in e-commerce. Its capital expenditure has doubled since 2019, reaching $24bn last year, equivalent to two-thirds of its operating cashflow. The retailer is now training up Sparky, an AI assistant that helps customers find products, and Wally, which helps its merchandising teams choose items to sell. “Everything is going in one direction for them,” says Robert Ohmes of Bank of America. “The flywheel is turning faster and faster.”

Where does growth come from next? With its promise of “everyday low prices”, Walmart has long been the retailer of choice for low- and middle-income Americans. Now it is trying to woo wealthier consumers. It has launched a premium food label, Bettergoods, which offers items like French macarons and olive-oil crackers that wouldn’t be out of place in a high-end grocer like Whole Foods. Shoppers can now find second-hand designer handbags on Walmart’s marketplace. The firm has been remodelling hundreds of its dingiest stores every year. And for those who still wouldn’t be seen dead in one of them, its online options are more convenient than ever.

Walmart is also looking abroad. Its strategy has been to experiment with different business models in different markets without fear of pulling out if need be. Walmart de México is the most-valuable firm on the local stockmarket; in China a Sam’s Club membership is seen as a ticket to the aspirational middle-class. In both countries Walmart is considered far more premium than it is at home. In India Walmart majority-owns Flipkart, an online marketplace, and PhonePe, a payments app. Since 2021, when it sold off businesses in Argentina, Britain and Japan, Walmart’s international division has been growing speedily. It expects to double its sales and operating profit between 2024 and 2028.

Walmart now confronts another disruptive force: the man behind the Resolute Desk. The retailer has been doing its best to ingratiate itself with Mr Trump since his return to the presidency. Mr McMillon was one of the few bosses who attended the presidential-inauguration ceremony in January, and has called on Mr Trump both at his Mar-a-Lago resort and the White House. In November Walmart said it was rolling back some of its diversity, equity and inclusion policies amid Mr Trump’s crusade against wokeness. It has also said it will miss its 2030 target for cutting greenhouse-gas emissions.

Mr Trump’s trade war has put Walmart in a delicate position, given its importance to American consumers. Its executives have been back and forth between the company’s headquarters in Bentonville, Arkansas, and Washington sharing real-time data with officials on prices and shopping behaviour to help inform policy. “This situation that we’re in today is very fluid,” says John Furner, head of Walmart’s business in America, diplomatically.

Tariffs may not be as much of a problem for the company as it would seem at first glance. Walmart has certainly benefited from cheap imports. Roughly a third of the products it currently sells in America are made or grown outside the country, largely in China, Mexico or Canada. Some of these Walmart has procured directly from foreign suppliers; others come from American firms that have offshored production in response to pressure from the retailer to lower prices.

Yet Walmart seems better placed to weather Mr Trump’s tariff storm than most of its competitors. It has already made progress diversifying its supply chain away from China over the past few years, observes Zhihan Ma of Bernstein, a broker. It has, for instance, been sourcing a greater share of its products from India. The retailer has been expanding its domestic supply chain, too. Take children’s car seats, most of which are made in China. In October, in anticipation of Mr Trump’s election, the company signed deals to secure much of America’s manufacturing capacity, according to Ms Ma.

Walmart’s heft also allows it to shift much of the burden of tariffs onto suppliers. Before the recent trade truce with China, which has resulted in American tariffs being lowered to 30% for 90 days, Bernstein estimated that new import duties were on course to raise the cost of products sold at Walmart by an average of 5.2%. Suppliers, it reckoned, would absorb half of that, with the average sticker price in Walmart stores rising by 2.6% to make up the balance. Sales volumes would drop by 2% in response, giving revenue a net boost of around half a percent. For most other big retailers, by contrast, Bernstein predicted a decline in sales. Walmart’s product mix helps: groceries, demand for which is less sensitive to price movements, account for three-fifths of its sales in America. That compares with one-fifth for Target, a bricks-and-mortar rival, and a sliver for Amazon.

Indeed, as Americans start to feel the pinch, Walmart’s lower prices may help it win over yet more customers. Research by JPMorgan Chase, another bank, suggests that it is typically 4-5% cheaper than Target and 8-10% cheaper than other grocers. Walmart will use that to its advantage. At a meeting with Wall Street analysts in April Mr McMillon said that the retailer plans to “play offence”. “Manager’s special” signs are already popping up around its stores, advertising discounts.

And what of Amazon? Over the past decade it has sought to become more like Walmart, purchasing Whole Foods in 2017 to expand its grocery business and experimenting with various types of physical stores. The effort has been a disappointment. A technology it pioneered to monitor customers as they pick items from shelves and charge them as they walk out has failed to entice the masses into its shops. Walmart may soon have little left to learn from the disrupter. ■