The keys to Walmart’s, Target’s Q2 success: Generative AI, curbside pickup, and marketplace growth

Both retailers used generative AI to improve employee productivity in Q2—Walmart leveraged the tech to improve its product catalog, and Target used it to enhance in-store employee tools. Target’s curbside pickup service helped it grow digital comparable sales 8.7% YoY, while Walmart’s marketplace and sales of GLP-1 drugs (e.g., Ozempic) contributed to its 4.2% comp sales growth YoY.

Here are four insights into each of the retailer’s Q2 successes.

1. Walmart, Target lean into generative A (genAI) to improve employee productivity

Walmart is using genAI to improve its product catalog, leveraging large language models to create or improve over 850 million pieces of product data.

“Without the use of generative AI, this work would have required nearly 100 times the current head count to complete in the same amount of time,” said Walmart president and CEO Doug McMillon, noting that the enhanced catalog also speeds up the time it takes for associates to pick online orders.

Target incorporated genAI into employees’ handheld devices, enabling them to quickly answer common questions like how to sign a customer up for a Target Circle card or how to restart a cash register after a power outage.

The tool has been used over 50,000 times with an average chat time of less than one minute, Michael Fiddelke, executive vice president, COO, and CFO at Target, said in an earnings call.

2. Target’s same-day services now account for more than two-thirds of sales

The biggest contributor to Target’s same-day sales is its curbside pickup service, Drive Up, which grew 14% in Q2.

• Drive Up generated $2 billion in sales in the quarter and more than $4 billion year to date.
• Target’s paid membership program, Target Circle 360, also promoted growth, with use of its same-day delivery service rising almost 14%.

These services help boost in-store sales as well, per Fiddelke.

“When people engage with Drive Up and with Circle 360 same-day delivery … their in-store shopping actually increases after they become users of those services. And so, [we] continue to watch that relationship closely and growth of those services means growth in our share of wallet.”

3. Walmart’s marketplace propels the retailer’s flywheel

Walmart’s marketplace business “helps pull through things like membership, and advertising, and fulfillment services,” said McMillon.

• Walmart US grew its ecommerce sales 22% in Q2, partly helped by its marketplace business, which grew 32% during the same period.
• Marketplace sales across fashion, toys, hardlines (which include appliances, automotive parts, sporting goods, and electronics), and home grew more than 20% in Q2.
• Ad sales driven by marketplace sellers were up nearly 50% in Q2, boosting Walmart Connect’s 30% growth.
• Over 40% of marketplace sellers also use Walmart’s fulfillment services, which grew 8% in Q2.

Recently, Walmart has opened up its ocean shipping service to all of its fulfillment services sellers, enabling international sellers to ship to the US.

This could give Walmart an edge over marketplaces like Temu and TikTok Shop, which have shaken up the US marketplace landscape by gaining quick popularity with consumers.

4. GLP-1 drugs, back-to-school bolster Walmart’s health and wellness business

While some reports suggest that GLP-1 drugs like Ozempic are putting a damper on grocery sales, retailers that sell the drugs could see a bump elsewhere.

• Sales of GLP-1 drugs boosted Walmart’s health and wellness business across Walmart and Sam’s Club stores in its latest quarter, contributing to Walmart’s 4.2% increase in comp sales, said McMillon.
• Supplements are also supporting growth across Walmart’s health and wellness business, especially amid the back-to-school season.
• “This is a time of year as people go back to school, back to college, you can lean into categories like over-the-counter supplements, and we can do really well,” said John Furner, president and CEO of Walmart US.

This was originally featured in the Retail Daily newsletter. For more retail insights, statistics, and trends, subscribe here.