Wal-Mart Is No Amazon.com

Don't believe the headlines.

A recent upgrade at Wal-Mart's (NYSE: WMT  ) online shop has the financial press christening it the new Amazon.com (Nasdaq: AMZN  ) .

Just check out some of the headlines.

  • "Wal-Mart Pushes Deeper Into Amazon E-commerce Territory" -- San Francisco Business Times
  • "Wal-Mart Stakes a Claim to Amazon's Turf " -- TheStreet.com
  • "WalMart.com Bulks Up, Takes Aim at Amazon, eBay" -- All Things Digital

Given the challenges mentioned in these headlines, you might expect to see Amazon CEO Jeff Bezos quivering on the ground in a fetal position, his chattering teeth biting down on a first-generation Kindle.

Don't bet on it.

Let's analyze Wal-Mart's breakthrough announcement yesterday. The world's largest offline retailer is adding a million items to its site with the launch of "Walmart Marketplace."

It all sounds impressive, until you realize that Wal-Mart is simply listing the items of a few third-party retailers -- eBags, CSN Stores, and Dreams' (AMEX: DRJ  ) Pro Team -- to its own listings.

Orders will be placed through Walmart.com's checkout platform, but they then get routed to the individual retailers that are responsible for the fulfillment and support. So any shipping complaints, exchange requests, and general customer-service matters are out of Wal-Mart's hands. This is just a glorified drop shipment service.

Serving as a hub for third-party merchants isn't new, of course. Sellers can also set up shop on Yahoo!'s (Nasdaq: YHOO  ) hosted storefront solution or sell directly through eBay (Nasdaq: EBAY  ) . Overstock.com (Nasdaq: OSTK  ) has a "Cars" tab on its site, but the page itself tells you that "Overstock.com does not operate this Web site or broker, sell, or lease motor vehicles." It is simply an information publisher powered by Zag.com.

Retailers can also reach out to customers on Amazon the Walmart Marketplace way, but the real convenience comes when third-party merchants truly hand Amazon the keys and let the leading online retailer warehouse their merchandise and handle all of the nitty-gritty stuff.

See, there are two things that Wal-Mart will have to do if it ever wants to compete with Amazon.com:

  • It needs to roll up its sleeves and commit to fulfilling third-party orders.
  • It needs to launch a clone of Amazon's Prime, with which shoppers pay $79 a year for free two-day shipping or deeply discounted overnight deliveries.

I don't think Wal-Mart has it in its DNA to compete. It may be a turnover tornado in the real world, but it's never made the commitment to truly compete in cyberspace. Walmart.com is popular, but mostly as an informational site for local shoppers.

Remember when Wal-Mart wanted to take on Netflix (Nasdaq: NFLX  ) ? It didn't have the dedication to open the regional distribution centers necessary to take on Netflix, so it handed over its 100,000 subscribers.

That's what will happen here, too. Wal-Mart may add merchants, but doing so will prove to be confusing over time. A real-world shopper will wonder why he or she just can't place an eBags order and have it waiting at the local Wal-Mart for pickup an hour later. The tangled nature of the offerings will make it difficult to offer a consistent Prime knockoff.

As usual, Wal-Mart's heart is in the right place, but its feet are too timid to take the next logical step.

"Pushes deeper"? "Stakes a claim"? "Takes aim"?

Wake up, my headline-scribbling peers. If anything, Wal-Mart is further distancing itself from Amazon this week.

Other headlines, if you still want to e-commerce the night away:

Amazon.com, eBay, and Netflix are Motley Fool Stock Advisor picks. Wal-Mart is a Motley Fool Inside Value selection. Try any of our Foolish newsletter services free for 30 days. Now that's window-shopping!

Longtime Fool contributor Rick Munarriz has been shopping online for about as long as Amazon.com has been in business. He owns shares in Netflix and is also part of the Rule Breakers newsletter research team, seeking out tomorrow's ultimate growth stocks a day early. The Fool has a disclosure policy.


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