Walmart (NYSE: WMT) raises its online game, challenging Amazon (NASDAQ: AMZN)
In the ever-expanding world of online retail, Walmart (NYSE: WMT) now offers stiff competition to Amazon (NASDAQ: AMZN), the 800-pound gorilla of e-commerce.
Walmart has been able to leverage its 4,700 stores to boost online sales. The ubiquitous presence of those stores around the country enables Walmart to deliver goods from them quickly, which also means less of a need for warehouse space. In addition, the raft of stores makes it easy for customers to pick up goods that they order online and to return them.
Walmart’s still a baby in online sales compared to Amazon with a 9% share in the US, versus 41% for Amazon, according to The Wall Street Journal. But Walmart is rising quickly.
The company’s e-commerce revenue jumped 16% in the quarter ended Jan. 31 from a year earlier. It executed same-day delivery on 5 billion items last year, up 100% from 2023, The Journal reports. Amazon online retail sales rose 7% in the fourth quarter.
Walmart stock returns beat Amazon
The online push has helped Walmart stock generate a total return of 40% over the past year, compared to 13% for Amazon. Walmart also has outperformed Amazon over the last three- and five-year periods, though Amazon is ahead for 10 years.
Walmart has increased its delivery speed with the help of its own delivery network, Spark, which it created in 2018. Walmart’s online operation isn’t profitable yet, but the company says that will happen.
Walmart also is building an online advertising service – Connect. Ad revenue soared 27% last year to $4.4 billion. Again that pales next to Amazon’s $52 billion, but it’s a positive sign.
Walmart Connect has just expanded with an application programming interface that increases the online display ads that ad agencies partnering with Walmart can provide on their platforms.
Membership fees are on the rise
Meanwhile, Walmart’s membership-fee revenue jumped 19% last year to $3.1 billion. That includes membership to Sam’s Club stores and Walmart+, which offers free delivery of online orders, store orders and drugs. Walmart+ also provides gasoline discounts and free streaming with Paramount+.
Walmart has a great chance to succeed with a combination of its massive brick-and-mortar presence and its growing online operation, analysts say.
“Walmart’s vast physical footprint and financial resources have enabled it to develop omnichannel [online and in-store] ordering and fulfillment, while developing an ecosystem via Walmart+ and its third-party online marketplace,” wrote Morningstar analyst Noah Rohr.
“While adoption is still nascent, we view Walmart as one of the few U.S. companies with enough scale to develop such a platform.”
The author owns shares of Amazon and Walmart.
