How Walmart Stock Hopes to Overtake Amazon Stock
With the tech industry, we’re always on the lookout for the next big thing, the next company that replicates the massive success experienced by a larger but potentially older (and therefore slower) company.
The “uber of ” became a very popular (and cliched) term when describing certain tech stocks. But right now we’re witnessing a fight between titans as Walmart Inc (NYSE:WMT) challenges Amazon.com, Inc (NASDAQ:AMZN) for dominance in the online marketplace.
A little bit of background is in order.
Amazon, as you probably know, has dominated the e-commerce for over a decade. The first trillion-dollar company (headed by the world’s richest man) is among the most powerful companies—if not the most powerful company—in the world.
Many competitors have tried to replicate Amazon’s success, or at the very least mitigate the damage that the company could do to their sales by offering their own deals online.
Walmart Inc, in fact, has been one of the few companies that hasn’t been all too damaged by Amazon.com, Inc’s surge over the past decade. And that’s because Walmart became wise to Amazon’s game and responded with its own competent online presence.
While many companies tried to create an online marketplace that would help ward off the Amazon threat, Walmart’s success came precisely because it was able to do just that; it now has one of the best online presences in the business.
Indeed, Walmart could be one of the biggest competitors for online dominance because of how successful its online presence is, being able to rival Amazon in many ways while offering a wide selection of products.
The two companies, in many ways, are quite similar. Both offer a wide range of goods and both have impressive online marketplaces.
As such, WMT stock may continue to rise as the company looks to better itself online.
Walmart Stock vs. Amazon Stock
This is hardly a David vs. Goliath story; more like Godzilla vs. King Kong. But all the same, the winner of this battle could decide where vast sums of future spending goes. In turn, it could make WMT and/or AMZN investors a lot of money.
Amazon, for instance, continues to grow year after year, eking out a larger and larger portion of retail sales.
We’ve seen the company’s effect on the economy by way of malls disappearing across the country. It’s no exaggeration to say that the retail landscape of the U.S. —and the world—has been radically redefined by the presence of Amazon.
And what’s more, with the current retail market conditions brought on as a result of the novel coronavirus (COVID-19), online sales are becoming even more important.
After all, if your local grocery store runs out of, say, toilet paper, Amazon has been delivering these types of necessary goods to front doors for a long while.
Couple this with the fact that many people are wary of stepping outside and heading over to grocery stores during a virus outbreak and you have what culminates in excellent conditions for AMZN stock.
And that’s where WMT stock comes in. Walmart is looking to beef up its online sales with the specific goal of challenging Amazon’s dominant online presence.
While Walmart Inc was able to resist Amazon.com, Inc’s incursions for a while, the company is now aiming to strike back. If successful, it could challenge Amazon for online dominance.
With this in mind, Walmart has plans to roll out its new “Walmart+” program.
Designed as a rebrand of its current “Delivery Unlimited” service, it acts similar to “Amazon Prime” in that, for a membership fee, it offers unlimited free shipping. This includes same-day shipping of groceries, something that could prove to be very useful during the current pandemic. (Source: “Walmart Is Quietly Working on an Amazon Prime Competitor Called Walmart+,” recode, February 27, 2020.)
Walmart+ is also rumored to offer a feature that would allow customers to use text messaging to place orders.
While the company was supposed to launch Walmart+ as soon as this month, there’s a good chance that the coronavirus outbreak has delayed the company’s plans.
Regardless, Walmart stock is in the enviable position of being one of the few stocks poised to actually benefit from the current crisis.
Walmart+ also hopes to offer shoppers other goodies down the line, including discounts on prescription drugs and gas, and even what it calls “Scan & Go” services, which would allow users to check out at physical stores without waiting in line (and, more importantly, with coronavirus around, with as little person-to-person contact as possible).
This on its own would not be enough to supplant Amazon Prime, which boasts more than 150 million members worldwide (not to mention that it got a boost by including its “Amazon Prime Video” streaming service in the bargain. (Source: Ibid.)
To be fair, Amazon isn’t taking this lying down. The company has routinely gone after Walmart’s customers. The company also offers same-day grocery shipping and has made a number of acquisitions—namely, Whole Foods Market, Inc. and online pharmacy PillPack—that put Amazon in direct competition with Walmart.
Furthermore, Amazon has found novel ways to target lower-income Walmart customers, offering discounts on its Prime membership to people on government assistance, as well as cash payment options for Prime orders.
And right now, Walmart Inc is no doubt behind in the online retail market. Amazon.com, Inc still has some of the best offers out there, including same-day shipping on millions of products.
But, and this is an important “but,” Walmart is betting that it can, if not match Amazon, certainly keep pace with it in the online marketplace.
Added to that, Amazon hasn’t made a lot of friends in the media lately, with many bemoaning the fact that the world’s largest company, with the world’s richest man as CEO (Jeff Bezos), treats its workers rather terribly.
The negative stories coming out of Amazon have shocked many, leading a significant number of politicians to call for regulations regarding the online giant.
Furthermore, the company has made headlines for its ability to avoid federal taxes.
While Walmart Inc commits many of the same sins, in recent years, Walmart has not received quite the same amount of heat that Amazon.com, Inc has. On top of that, the Walton family (the founders of Walmart) have not received nearly the same amount of media scrutiny as Bezos.
And, of course, there’s the fact that Amazon is very much of the modern era, when data mining, automation, and inequality are all buzzwords and Amazon is major player in all those areas.
But the overall takeaway is that WMT stock could be boosted for years to come due to the company’s latest online gamble. By copying, to an extent, the Amazon model, Walmart is hoping to boost the price of Walmart stock by offering the best online shopping experience not named Amazon.
Walmart is also hoping to maintain a less, shall we say, aggressive public image. The cumulative effect will potentially be a massive spike in revenue for Walmart Inc, which in turn means that the future could be very bright for WMT stock.
Chart courtesy of StockCharts.com
Even with the drop in value brought on by the stock market crash, both Walmart stock and Amazon stock are still relatively strong compared to a year ago. Before the recent market collapse, both AMZN stock and WMT stock were up significantly, with gains of more than 25% each over the past 12 months.
Which is to say that both companies are very strong to begin with, and the current need for online deliveries of groceries may spike their revenue.
Furthermore, Walmart aims to make some big changes in the coming months, something that could send its share price soaring.
It’s not often (or ever) that you hear Walmart stock referred to as a tech stock, yet that is what the company is angling for right now.
Having dominated the brick-and-mortar retail space in so many ways—from clothing, to groceries, to general goods—Walmart now seeks to make a name for itself in the online space.
With Walmart+, the company seems poised to levy a legitimate challenge to Amazon’s dominance of the e-commerce sector. This move could pay off in a big way for Walmart stock as the company competes with Amazon.
Which isn’t to say that Walmart Inc is going to be the new Amazon.com, Inc or will be able to overtake Amazon. What is certain, however, is that Walmart is making moves to improve its outlook, something that could pay off in a big way as the company eats away at Amazon’s market share.
Adding to all that, of course, is the coronavirus and the new stock market situation that the disease has left in its wake.
With stocks tumbling across the board, WMT stock and AMZN stock are among the best options to weather the storm. Both companies are large enough to withstand the blow and are situated to actually benefit from the new coronavirus economy that’s developing.