Wal-Mart's Online Retail Segment Is Growing Faster Than Amazon.com

It might be a little hard to believe, but Wal-Mart has actually scored a victory over Amazon.com in the online retail wars. Is this a sign of things to come, or just an anomaly?

May 14, 2014 at 12:00PM

Amazon.com (NASDAQ:AMZN) now has something else to worry about: Wal-Mart Stores'  (NYSE:WMT) online sales are growing faster than its sales are growing. The latest figures show that the theory that Wal-Mart is Amazon's biggest potential competitor holds some water.

The numbers indicate that Wal-Mart is obviously doing something right even though Amazon.com is still the king of online retail. Wal-Mart's worldwide Internet sales grew by 30% in the fiscal year ended on Jan. 31, while Amazon.com's sales increased by 20% in 2013, according to statistics compiled by Online Retailer.

The numbers indicate that Wal-Mart's online retail volume is rising, but it still has a ways to go to match Amazon.com. Wal-Mart only made $10 billion from its online segment, compared to Amazon.com's $67.5 billion in revenue.

Amazon.com is still the No. 1 online retailer, while Walmart.com is No. 4, Online Retailer reported. Yet the publication's editor, Dan Davis, thinks Wal-Mart could soon be in a position to challenge Staples for the No. 2 spot on the list of Top 500 online retailers. To reach No. 2, Wal-Mart's online sales will have to surpass both Staples and Apple, which is currently No. 3.

Amazon.com dwarfs Wal-Mart
Despite its recent success, Wal-Mart is still tiny compared to Amazon.com in the world of online retail. The Wall Street Journal noted that Amazon.com sold more stuff online than its 10 biggest competitors combined.

That means Wal-Mart might never be more than a niche player online simply because Amazon.com got there first. It also means that Wal-Mart will have to be extremely aggressive and spend a lot of money to pose any sort of credible challenge to Amazon.com. To get up to that $10 billion level in online sales, Wal-Mart had to spend $500 million last year.

Wal-Mart imitates Amazon.com
There is one major advantage for Wal-Mart here: it does not have to invent a new online business model like Amazon.com did. Instead, all it has to do is copy the business model created by Amazon and eBay. Amazon's biggest problems are that it has demonstrated that online retail is viable and it has shown others how to succeed online.

Wal-Mart is already copying part of Amazon's business model by adding new services. It just made a deal with autoinsurance.com to sell car insurance policies in several American states. Like Amazon, Wal-Mart is also building new online fulfillment centers.

Wal-Mart has learned something else from Amazon.com: if you don't have the capabilities, buy some smaller companies that do. Wal-Mart has purchased 12 e-commerce companies in the last three years, including search engine marketing expert Adchemy last week. Wal-Mart hopes to use Adchemy's technology to create a search engine to rival those at Amazon and Google.

Many of Wal-Mart's existing resources, such as the distribution centers for its stores and its Sam's Club membership stores, can easily be integrated into its online retail efforts. Wal-Mart is using some of its stores as fulfillment centers for Walmart to Go, its answer to Amazon Prime.

Another way online retail can help Wal-Mart leverage its resources is to allow the company to penetrate new markets without building stores. Neil Ashe, Wal-Mart's head of e-commerce, predicted that his company will soon be serving some nations solely through online retail. Instead of building stores in a country, Wal-Mart will simply ship items there from a fulfillment center, much like Amazon.com does.

Wal-Mart is playing to one of its greatest strengths here; namely, its ability to imitate competitors. After all, Wal-Mart began as little more than an imitation of K-Mart.

Foolish takeaway
Despite its revenue and its impressive ability to imitate, there's a strong possibility that Wal-Mart will never be anything but a niche player in the world of online retail. Yet that niche could be a very big one given the speed at which web-based retail sales are growing.

Are you ready to profit from this $14.4 trillion revolution?
Let's face it, every investor wants to get in on revolutionary ideas before they hit it big. Like buying PC-maker Dell in the late 1980s, before the consumer computing boom. Or purchasing stock in e-commerce pioneer Amazon.com in the late 1990s, when it was nothing more than an upstart online bookstore. The problem is, most investors don't understand the key to investing in hyper-growth markets. The real trick is to find a small-cap "pure-play" and then watch as it grows in EXPLOSIVE lockstep with its industry. Our expert team of equity analysts has identified one stock that's poised to produce rocket-ship returns with the next $14.4 TRILLION industry. Click here to get the full story in this eye-opening report.

Daniel Jennings has a position in eBay. 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