U.S. retail giant Walmart Inc., often associated with “low prices” by South Koreans, is leading innovation in the U.S. offline retail sector.

Its bold services are translating into solid performance, a sharp contrast to Korea’s top retail companies, Lotte Corp. and Shinsegae Inc., which are struggling to survive.

Walmart has been revolutionizing its delivery service since 2011, when it launched a “pickup service” that allows customers to collect online orders in-store. It now offers more than 10 delivery options, including “quick delivery,” which delivers products in as little as an hour, “in-home delivery” that places items directly into refrigerators, and deliveries via “Walmart Spark” drivers, autonomous vehicles, and drones.

Walmart also introduced an “early morning delivery service” in March 2024, boasting that customers could order live bait from Walmart at 6 a.m. and have it delivered to their fishing spot within 30 minutes. The company, furthermore, plans to deliver prescription medications within 30 minutes in 49 of the 50 U.S. states, excluding North Dakota which prohibits such deliveries by law, by January 2025, making the initiative effectively nationwide.

These innovations have driven results.

Walmart’s third-quarter sales, announced on November 19th, 2024, totaled $169.6 billion, a 5 percent increase year-over-year and the company is on track to reach a record $680.5 billion in sales for the full year.

Walmart has maintained its position as the world‘s top retailer in terms of sales, despite fierce competition from Amazon and low-cost Chinese products. Its online growth is also notable: its quarterly growth rates, which were in the single digits in 2021, have climbed to 17 to 27 percent in 2022 and 21 to 27 percent in 2024.

The situation is entirely different for Korean top retailers Lotte and Shinsegae. Lotte Mart’s sales dropped by about 40 percent from about 9 trillion won ($6.41 billion) in 2012 to 5.73 trillion won in 2023. Shinsegae Emart Inc.’s sales grew from 11 trillion won in 2012 to 15 trillion won in 2023, but its operating profits plummeted by 75 percent from 775.1 billion won to 188 billion won.

Facing survival challenges, both companies have declared emergency management and initiated restructuring measures, including voluntary retirements. Experts note that Korea’s retail sector must address three factors to catch up.

First is the online retail strategy.

Walmart avoided head-on competition with Amazon.com Inc. Instead, it preserved its offline store competitiveness while gradually expanding online services. In contrast, Korean retailers heavily invested in online platforms early to compete with companies like Coupang Inc., only to face disappointing results.

“Walmart did not blindly compete with Amazon’s model, but thoroughly analyzed its strengths,” Suh Yong-gu, a professor of business administration at Sookmyung Women’s University, said.

Walmart began online services at its densely located offline stores, creating synergy between the two channels. Its pickup service allows customers to order online and retrieve items at Walmart stores, with staff loading items directly into their trunks.

This service, introduced in 2011, saw explosive growth during the Covid-19 pandemic.

“Korean companies, on the other hand, spent heavily trying to mimic online platforms with apps and new logistics systems, but failed to connect them with offline operations,” Suh said.

Second, Walmart invested in technologies that led to tangible cost reductions, such as artificial intelligence (AI), big data, and robotics which bolstered the company’s competitiveness under its ”everyday low prices“ strategy.

The company also diversified its supply chain and streamlined its logistics and inventory management. It specifically invested $14 billion in supply chain automation in 2021, cutting per-order net shipping costs by 40 percent in the United States, and plans to automate 65 percent of its stores and 55 percent of its fulfillment centers by 2026.

Korean retailers, in contrast, have exhausted all available capital on online platform expansion.

“We poured massive funds into building online shopping malls in their early stages and are still suffering losses, which leaves us no room to invest technologies such as AI, robotics, or drones,” a retail industry insider said.

“We are falling behind in logistics innovations led by online platform companies,” the insider added.

Last but not least is a regulatory environment without operating hour restrictions.

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