Wal-Mart Takes On Amazon.com -- and Itself

Although often seen from the outside as a stodgy, old-line type of department store, Wal-Mart (NYSE: WMT  ) has also been recognized for some time now as a technology leader in retailing. It was an early adopter of RFID tag technology, pushed for using universal barcodes as a labeling system, and also signed on at an early stage with electronic data interchange, or EDI, which is the transfer of documents electronically between the company and its suppliers, rather than using paper or fax.

Technology has also shaped its retailing policies, such as its early adoption of free ship-to-store policies for items ordered online and the blending of mobile communications with in-store shopping. For example, Wal-Mart has been testing the Scan & Go iPhone app that lets you scan and bag your purchases while shopping and simply scan a QR code at checkout to complete the purchase. Now you're able to access its entire online and in-store inventory from a smartphone or tablet, anywhere, anytime.

Although this move is a recognition that consumers don't care how they can buy a product as long as it can be done quickly, cheaply, and conveniently, it's really a response to inroads made by Amazon.com (NASDAQ: AMZN  ) into its retail domain, which has become the real competitive threat to Wal-Mart's position.

Its fiscal 2015 first-quarter earnings recorded their fifth straight quarterly decline in U.S. sales as store traffic fell for the sixth consecutive quarter. Wal-Mart's return on investment, which it views as a meaningful metric for investors scoring its ability to deploy assets, dropped below 17%, while its return on assets fell to almost 8%.

Source: Wal-Mart SEC filings.

Source: Wal-Mart SEC filings.

As difficult and worrisome as the quarter was for Wal-Mart, which it blamed in part on weather and cuts to government assistance programs (low-income consumers spend 18% of all food-stamp money at Wal-Mart), e-commerce remained a bright spot. At its namesake stores, e-commerce sales positively affected comp sales by approximately 0.3% and positively affected them by 0.2% at its Sam's Club warehouse stores.

Wal-Mart is responding to the challenges Amazon presents by pursuing the same sort of dynamic pricing policies its rival has adopted. Just a couple of years ago, Wal-Mart made hay with its mobile app that allowed customers to compare prices at its stores with those offered online and at competitors' sites, a move that forced Target to adopt and extend to year-round a price-matching guarantee.

Yet Wal-Mart ultimately saw that as offering no advantage for itself, so it began using big data analysis and pricing cropped from its rivals to change its own pricing on the fly. Rather than maintain the low prices every day that you find at its brick-and-mortar stores, the retailer's e-commerce platform deployed dynamic pricing to be a lower-price option, though it's probably led to some confusion for customers who find that Wal-Mart won't match its in-store prices to those they find on its website.

Still, that's allowed the retailer to surpass Amazon's growth rate last year. Whereas Wal-Mart's rival grew sales by 20% in 2013, it saw a 30% surge in sales. Amazon might be an order of magnitude larger than Wal-Mart, with some $68 billion in sales, but the retailer is proving it can hold its own in the online world.

And that's coming about because of its use of technology to eliminate "friction points," creating a seamless experience between online and offline shopping through whatever means the customer wants to access the company. As a result, some 20% of all items purchased online are being fulfilled at its stores.

We're not about to see Wal-Mart's supercenters disappear from the retailing landscape anytime soon, but we will see the retail king using technology to remake itself into an e-commerce giant able to take on all comers. As it has changed the face of physical retailing, it may prove itself to be a bigger competitor to the likes of Amazon.com -- and itself -- than many now give it credit for.

Leaked: Apple's next smart device (warning, it may shock you)
Apple recently recruited a secret-development "dream team" to guarantee its newest smart device was kept hidden from the public for as long as possible. But the secret is out, and some early viewers are claiming its everyday impact could trump the iPod, iPhone, and the iPad. In fact, ABI Research predicts 485 million of this type of device will be sold per year. But one small company makes Apple's gadget possible. And its stock price has nearly unlimited room to run for early-in-the-know investors. To be one of them, and see Apple's newest smart gizmo, just click here!


Read/Post Comments (0) | Recommend This Article (1)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

Be the first one to comment on this article.

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 3030249, ~/Articles/ArticleHandler.aspx, 8/23/2014 9:24:15 AM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...


Advertisement