Yahoo Finance Walmart Is Taking On The E-Retail Giants
Interested In Walmart? What Investors Need To Know (Part 16 of 28)
Amazon versus Walmart
Despite its roots in brick-and-mortar retail, Walmart (WMT) is posing a credible challenge for e-retail companies like Amazon (AMZN). E-commerce sales grew from $1.6 billion in fiscal year 2005 to ~$10 billion in fiscal year 2014. Web sales are expected to come in at $12.5 billion in fiscal year 2015.
Amazon’s 2013 global online sales were over $67 billion. Its sales were more than six times Walmart’s online sales—estimated at ~$10 billion. However, while Amazon gets most of its revenue from online channels, Walmart’s total online sales were less than 3% of its global revenue.
Profitability
Amazon’s profitability is also low to mostly negative. The e-retailer concentrated on capturing the market, testing new technologies, and its expansion and customer service efforts. This didn’t help its profits. Walmart has also been incurring operating losses on its e-commerce sites. However, the profitability of its brick-and-mortar business gives it more wriggle room than Amazon. Walmart expects to turnaround its e-commerce business by fiscal year 2018.
Walmart’s advantage
Walmart is using its existing supercenters and distribution and logistics network as fulfillment centers. This reduced its investment in infrastructure to a considerable extent. It gave Walmart a competitive advantage over Amazon and other online retailers.
Walmart is also able to offer omni-channel options to its customers. Customers can order online. The company can use its retail network to ship directly from stores. It also offers click-and-collect. The customer orders online and can collect from certain stores. Currently, this facility is available in certain US markets. Walmart also rolled out select overseas markets as well.
Walmart is testing the online grocery concept in select western markets in the US. This product would compete directly with Amazon Fresh—Amazon’s online grocery. Historically, online groceries haven’t been profitable. It will be interesting to see if Walmart can leverage its “Everyday Low Prices” and “Everyday Low Costs” strategies in the segment.
Walmart and Amazon are part of the portfolio holdings of the SPDR MSCI World Quality Mix ETF (QWLD). Combined, they have an ~1% weight in QWLD. They are also part of the SPDR S&P Retail ETF (XRT) with an ~2% weight together and the SPDR S&P 500 ETF (SPY) with an ~1.4% weight together.
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