Will Wal-Mart Overtake Amazon as the No. 1 Online Retailer?

This might sound outlandish given Amazon’s online strength, but there are several reasons you shouldn't completely rule out this possibility.

Jan 14, 2014 at 7:30PM

Bearish sentiment for Wal-Mart Stores (NYSE:WMT) has increased over the past few months, which is indicated by a 54.3% increase in the short position on the stock since October. Most of these people likely turned bearish because Wal-Mart announced that its customers weren't spending as much as they had in the past. However, you might not want to read into this statement too much.

First off, any sell-offs in the stock related to that news likely have already taken place. Second, the data breach at Target (NYSE:TGT), its closest brick-and-mortar competitor, will likely lead to market share gains for Wal-Mart, especially since Target sees a 2.5% comps decline year over year, much weaker than the previous expectation of comps coming in flat. Third, despite Amazon.com (NASDAQ:AMZN) maintaining a clear advantage in online sales, Wal-Mart still has a massive amount of capital available, some of which will be used in an attempt to catch Amazon online. 

Unrealistic dreams?
Wal-Mart's expected online sales for 2013: $10 billion. Not bad, but still nothing compared to Amazon, with expected online sales for 2013 of $74 billion. Given these numbers, it might seem inconceivable that Wal-Mart has any chance whatsoever of catching Amazon as the No. 1 online retailer in the world. One thing is for sure, Wal-Mart is the clear underdog, especially since Amazon's technology allows it to change prices 2.5 million times per day, giving it a substantial price advantage over Wal-Mart.

In other words, Amazon can better target the value-conscious consumer with adjusted lower prices on specific products. Wal-Mart's price changes in November: 52,956. It's unlikely this number has changed much in comparison to Amazon.

But there are still several reasons not to underestimate Wal-Mart.

Aggressive planning and deep pockets
Wal-Mart plans on spending $0.10 per share on e-commerce development in 2014. The majority of this capital will likely go to investments in technology labs. Most people don't know this, but Wal-Mart has purchased eight technology labs over the past three years. These labs have produced several quality innovations, including a Social Genome product that collects data from social-media sites for information. This product allows Wal-Mart to see what millions of their customers are talking about online. It can then use this information for better merchandising and marketing.

Wal-Mart can also inform its customers, or family and friends of its customers, about discounts on select items. Another success is the Crowd-Sourcing Project, through which customers can vote for products they want to see on Walmart.com. This is in addition to mobile apps.

Additionally, Wal-Mart wants to find a way to offer same-day delivery for products purchased online. But it must plan carefully to avoid any significant hits to margins. At the moment, in-store pickup is a positive for Wal-Mart, because it sometimes leads to customers shopping in the store. This then leads to increased sales. 

As far as online performance, Amazon.com currently has a global traffic ranking of 8 and a domestic traffic ranking of 5. Walmart.com has a global traffic ranking of 140 and domestic traffic ranking of 31. The good news for Wal-Mart is that it's performing well online.

For instance, over the past three months, the bounce rate (where a visitor views one page and leaves) has declined 5% to 29.6%, page views-per-user has increased 12.1% to about 6.7, and time-on-site has improved 8% to 5:48.

That's the good news. The bad news is that Amazon.com, despite its online lead, is growing even faster. Over the past three months, the bounce rate has dropped 29% to 28.2%, page views-per-user has increased 30.6% to 11.1, and time-on-site has improved 38% to 9:17. These are astronomical numbers.

For the record, Target.com has a global traffic ranking of 241 and a domestic traffic ranking of 52. Over the past three months, the bounce rate has increased 2% to 30.3%, page views-per-user has slipped 1% to 4:9, and time-on-site is flat at 4:29. Nothing to panic over, but not impressive. 

Other factors to consider
Even if Wal-Mart can't catch Amazon online, that doesn't mean it should be disregarded as an investment option. Wal-Mart has an average profit of $1.8 million per hour, and 90% of Americans live within 20 minutes of a Wal-Mart store. On average, more than 245 million customers visit Wal-Mart per week (physical plus online). Therefore, it's not as though you would be investing in a company without potential. 

The bottom line
Wal-Mart catching Amazon online is an unlikely scenario, but Sam Walton began with one physical location in 1962, and no one would have predicted what Wal-Mart is today. The good news is that Wal-Mart should remain a quality long-term investment regardless of whether or not it sees success in this area. Wal-Mart is the largest retailer in the world, which leads to tremendous cash flow generation. This cash flow can then be used for innovation, global expansion, and capital returns to shareholders. 

Strong dividend-paying companies for long-term investors 
One of the dirty secrets that few finance professionals will openly admit is the fact that dividend stocks as a group handily outperform their non-dividend paying brethren. The reasons for this are too numerous to list here, but you can rest assured that it's true. However, knowing this is only half the battle. The other half is identifying which dividend stocks in particular are the best. With this in mind, our top analysts put together a free list of nine high-yielding stocks that should be in every income investor's portfolio. To learn the identity of these stocks instantly and for free, all you have to do is click here now.

Fool contributor Dan Moskowitz has no position in any stocks mentioned. The Motley Fool recommends Amazon.com. The Motley Fool owns shares of Amazon.com. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

4 in 5 Americans Are Ignoring Buffett's Warning

Don't be one of them.

Jun 12, 2015 at 5:01PM

Admitting fear is difficult.

So you can imagine how shocked I was to find out Warren Buffett recently told a select number of investors about the cutting-edge technology that's keeping him awake at night.

This past May, The Motley Fool sent 8 of its best stock analysts to Omaha, Nebraska to attend the Berkshire Hathaway annual shareholder meeting. CEO Warren Buffett and Vice Chairman Charlie Munger fielded questions for nearly 6 hours.
The catch was: Attendees weren't allowed to record any of it. No audio. No video. 

Our team of analysts wrote down every single word Buffett and Munger uttered. Over 16,000 words. But only two words stood out to me as I read the detailed transcript of the event: "Real threat."

That's how Buffett responded when asked about this emerging market that is already expected to be worth more than $2 trillion in the U.S. alone. Google has already put some of its best engineers behind the technology powering this trend. 

The amazing thing is, while Buffett may be nervous, the rest of us can invest in this new industry BEFORE the old money realizes what hit them.

KPMG advises we're "on the cusp of revolutionary change" coming much "sooner than you think."

Even one legendary MIT professor had to recant his position that the technology was "beyond the capability of computer science." (He recently confessed to The Wall Street Journal that he's now a believer and amazed "how quickly this technology caught on.")

Yet according to one J.D. Power and Associates survey, only 1 in 5 Americans are even interested in this technology, much less ready to invest in it. Needless to say, you haven't missed your window of opportunity. 

Think about how many amazing technologies you've watched soar to new heights while you kick yourself thinking, "I knew about that technology before everyone was talking about it, but I just sat on my hands." 

Don't let that happen again. This time, it should be your family telling you, "I can't believe you knew about and invested in that technology so early on."

That's why I hope you take just a few minutes to access the exclusive research our team of analysts has put together on this industry and the one stock positioned to capitalize on this major shift.

Click here to learn about this incredible technology before Buffett stops being scared and starts buying!

David Hanson owns shares of Berkshire Hathaway and American Express. The Motley Fool recommends and owns shares of Berkshire Hathaway, Google, and Coca-Cola.We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

©1995-2014 The Motley Fool. All rights reserved. | Privacy/Legal Information