Wal-Mart (NYSE: WMT) has been a household name for many, many years. And it’s one of the largest retailers in the U.S.
Wal-Mart has more than 4,700 stores throughout the U.S., and the company estimates that 90% of the U.S. population lives within 10 miles of one of its stores.
Its stores are accessible for consumers who like to shop by going to physical stores to see the items in person before buying them. For most families, it’s a one-stop shop. Wal-Mart stores have almost anything that you could be looking for.
Whether it’s a new car battery, some groceries for the week, or a new lamp for your living room — the options are limitless and the prices tend to be pretty cheap.
But over the last few years, it’s really seen a change in the retail industry because of another large retailer. Even though this retail company conducts most of its business online, it’s still becoming a huge disrupter for Wal-Mart stores and other retail stores nationwide.
Amazon (NASDAQ: AMZN) became a publicly traded company in 1997 when it was just an online bookseller. The company is still considered a bookseller, but it’s also moved its business beyond that. It’s become so much more.
Amazon IPO’d with $18 per share, and as of October 10, 2017 — 10 years since it went public — it’s trading at $996.67 per share. It’s grown significantly since its IPO, and it continues to expand its business into a variety of different markets.
It’s not a business anymore but instead an ecosystem. It’s so easy and convenient to search on Amazon’s website for a certain item and have it delivered to you within two days or even less! Basically, it has become the one-stop shop for online visitors just like Wal-Mart is the one-stop shop for in-person shoppers.
The growth of Amazon has Wal-Mart and a lot of other retail stores worried and not just because of its convenience for shoppers who prefer to skip the lines and shop online. But also because the company recently acquired Whole Foods for $13.7 billion, which means that Amazon now has 400 stores at its disposal.
On top of that purchase, the company continues to drastically increase the number of its distribution centers throughout the U.S.
Amazon’s presence is no longer based solely on the World Wide Web but now also in the real world.
However, Wal-Mart isn’t giving up that quickly — it’s trying to catch up with Amazon. The company plans to add 1,000 online grocery locations, which is around double the current amount of sites that Wal-Mart has. These locations help fulfill orders from customers who are buying their groceries on Wal-Mart’s website.
And Wal-Mart is expecting its U.S. e-commerce sales to surge 40% over the next fiscal year.
Moody’s Corporation analyst Charlie O’Shea said:
It is clear that Wal-Mart intends to continue to turn up the heat online. We still believe Amazon’s lead in online retail is insurmountable; however, Wal-Mart continues to widen the gap between itself and all other brick-and-mortar retailers.
According to Bloomberg, Wal-Mart’s investments in e-commerce have already helped in boosting its sales, and the company expects its U.S. online revenue to reach $11.5 billion this year.
But Wal-Mart’s push toward online sales has come at a cost for its in-store sales. Since its profit margins are smaller for online orders than for in-store sales, the company saw its gross profit margin shrink for the first time in two years.
While Wal-Mart probably won’t come close to Amazon’s online presence, it’s still making significant strides toward becoming a strong competitor. Wal-Mart won’t be lying down and letting Amazon win this fight.
Until next time,
Jennifer Clark
Pro Trader Today