Wal-Mart and Food Delivery: Quietly Preparing for Success

You haven’t read anything about a recent Wal-Mart acquisition, have you? Well, an acquisition indeed took place, and it fits into Wal-Mart’s plan of gaining an edge in food delivery and in-store pickup.

Mar 9, 2014 at 10:00AM



Most investors think of Wal-Mart Stores (NYSE:WMT) as a massive and mature company that doesn't do much to increase its growth potential. These investors are only half right. While Wal-Mart is a massive and mature company, it still finds ways to grow -- or at least attempts to find ways to grow.

Currently, there are several different aspects to explore. However, in this case, we'll take a look at one of Wal-Mart's stealthier moves, which was to quietly purchase a small company that will potentially give it an edge over Amazon.com's (NASDAQ:AMZN) AmazonFresh in the food-delivery market.

Who are those guys?
Wal-Mart recently, and quietly, acquired Yumprint, which helps consumers discover new recipes from thousands of food blogs, plan meals, and calculate nutritional information. The website, which was founded in 2011, also has a mobile app, which leads to increased convenience.

To give you an idea of the rapid growth of Yumprint, take a look at its Alexa rankings. Alexa, which happens to be owned by Amazon, is the global leader in website analytics. In simpler terms, it determines what websites get the most traffic as well as which sites are growing or failing.

Yumprint.com Alexa ranking has improved 56,097 spots to 295,672 over the past three months. Also over the past three months, pageviews-per-user has increased 3% to 2.30, average time-on-site has increased 4% to 2:30, and the bounce rate (visitor views one page and leaves) has declined 18% to 45.6%. All these numbers are positive.

Yumprint was founded by Chris Crittenden and Wes Dwyer, former management consultant at McKinsey & Co. and former engineer for Microsoft, respectively. That sounds like a winning team. And that's part of the reason Wal-Mart made the acquisition.

The details of the deal haven't been disclosed, but we do know that the acquisition was made to help Wal-Mart's 'Walmart To Go' online delivery service. With Yumprint on board, Wal-Mart customers will now have an opportunity to form their shopping lists based on recipe finds. Additionally, Yumprint's technology will offer the following benefits: recipe semantics, how to better match ingredients to advertisements, nutritional information calculations, and consumer taste preferences.

This acquisition is in addition to OneOps (cloud computing start-up), Tasty Labs (putting the useful back into social software), Torbit (measures website speed), and Inkiru (combines predictive intelligence, data analytics, and a decision engine). All acquisitions have been made by @WalMartLabs

It's clear that Wal-Mart is looking to grow technologically, and that its most recent acquisition might give it an edge over AmazonFresh. But how do these two services compare to each other right now?

Getting fresh
Currently, Walmart To Go costs $5-$7 per delivery with a minimum order of $30. In-store pickup is available for free, but it's only available at 11 locations in the Denver area as of right now. 

AmazonFresh is available in Seattle, Los Angeles, and San Francisco. Unlike Walmart To Go, it comes with an annual fee of $299. In cities like Seattle, Los Angeles, and San Francisco, this might work, but such a hefty annual fee might limit AmazonFresh's potential in other geographical areas where consumers don't possess as much buying power. The one positive is that anyone who signs up will receive an Amazon Prime membership.

The biggest disadvantage for AmazonFresh is that in-store pickup isn't an option. By offering in-store pickup, Wal-Mart can guarantee more freshness, and it could lead to people shopping for other products in the store. 

Kroger's (NYSE:KR) Harris Teeter offers in-store pickup, which goes by the name of Express Online Shopping. You can select the time you want to pick up your food, which helps guarantee freshness. However, it's not free, coming with a cost of $4.95. 

If you're considering Kroger over Wal-Mart from an investing perspective, then you will have a difficult decision to make. While Wal-Mart has delivered top-line improvement of 18.05% over the past five years, Kroger has grown at a faster 31.18% over the same time frame. On the other hand, Wal-Mart has generated $23.26 billion in operating cash flow over the past year, much more significant than Kroger's $3.48 billion. Of course, Wal-Mart is a much larger company, but the fact is that this cash-flow generation will lead to more reinvestment opportunities. Furthermore, Wal-Mart currently offers a dividend yield of 2.60%, whereas Kroger yields just 1.60%. For the record, Amazon generated $5.48 billion in operating cash flow over the past year. 

Walmart To Go currently has an edge over both competitors in food delivery, which is an edge it needs. Amazon is a rapidly growing company, and this could present at least one opportunity for Wal-Mart to grow as quickly as Amazon in one area. 

Also, according to RetailNet, a basket of almost 30 items cost $94.80 in Los Angeles with AmazonFresh, compared to $80.38 with Walmart To Go. AmazonFresh is going after a higher-end shopper, which is somewhat surprising given the company's historical approach. Walmart, on the other hand, is targeting the masses. While reports indicate that AmazonFresh is appreciated by current customers, its approach of an annual fee and higher-priced items will limit its potential. Walmart should have more to gain. 

The Foolish takeaway
At the moment, Walmart To Go is just a small part of Wal-Mart's business; but if it takes off, it could become a significant growth driver in the future. There are many challenges in this business, especially when it comes to consistent profitability, but Wal-Mart is quietly setting itself up for success by acquiring smaller companies like Yumprint in order to increase its odds of success. Therefore, whenever you hear or read that Wal-Mart is going backwards, keep in mind its most recent initiatives as well as its past success at finding ways to win. Please do your own research prior to making any investment decisions.

If you're looking for companies with great growth potential....
They said it couldn't be done. But David Gardner has proved them wrong time, and time, and time again with stock returns like 926%, 2,239%, and 4,371%. In fact, just recently one of his favorite stocks became a 100-bagger. And he's ready to do it again. You can uncover his scientific approach to crushing the market and his carefully chosen six picks for ultimate growth instantly, because he's making this premium report free for you today. Click here now for access.

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