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

A lower online pricing policy helps the retail king challenge e-commerce rivals -- but also its own brick-and-mortar stores.

Jul 15, 2014 at 8:40PM

Images

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%.

Screen Shot

Source: Wal-Mart SEC filings.

Screen Shot

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!

Rich Duprey has no position in any stocks mentioned. The Motley Fool recommends and owns shares of Amazon.com. Try any of our Foolish newsletter services free for 30 days. 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.

1 Key Step to Get Rich

Our mission at The Motley Fool is to help the world invest better. Whether that’s helping people overcome their fear of stocks all the way to offering clear and successful guidance on complicated-sounding options trades, we can help.

Feb 1, 2016 at 4:54PM

To be perfectly clear, this is not a get-rich action that my Foolish colleagues and I came up with. But we wouldn't argue with the approach.

A 2015 Business Insider article titled, "11 websites to bookmark if you want to get rich" rated The Motley Fool as the #1 place online to get smarter about investing.

"The Motley Fool aims to build a strong investment community, which it does by providing a variety of resources: the website, books, a newspaper column, a radio [show], and [newsletters]," wrote (the clearly insightful and talented) money reporter Kathleen Elkins. "This site has something for every type of investor, from basic lessons for beginners to investing commentary on mutual funds, stock sectors, and value for the more advanced."

Our mission at The Motley Fool is to help the world invest better, so it's nice to receive that kind of recognition. It lets us know we're doing our job.

Whether that's helping the entirely uninitiated overcome their fear of stocks all the way to offering clear and successful guidance on complicated-sounding options trades, we want to provide our readers with a boost to the next step on their journey to financial independence.

Articles and beyond

As Business Insider wrote, there are a number of resources available from the Fool for investors of all levels and styles.

In addition to the dozens of free articles we publish every day on our website, I want to highlight two must-see spots in your tour of fool.com.

For the beginning investor

Investing can seem like a Big Deal to those who have yet to buy their first stock. Many investment professionals try to infuse the conversation with jargon in order to deter individual investors from tackling it on their own (and to justify their often sky-high fees).

But the individual investor can beat the market. The real secret to investing is that it doesn't take tons of money, endless hours, or super-secret formulas that only experts possess.

That's why we created a best-selling guide that walks investors-to-be through everything they need to know to get started. And because we're so dedicated to our mission, we've made that available for free.

If you're just starting out (or want to help out someone who is), go to www.fool.com/beginners, drop in your email address, and you'll be able to instantly access the quick-read guide ... for free.

For the listener

Whether it's on the stationary exercise bike or during my daily commute, I spend a lot of time going nowhere. But I've found a way to make that time benefit me.

The Motley Fool offers five podcasts that I refer to as "binge-worthy financial information."

Motley Fool Money features a team of our analysts discussing the week's top business and investing stories, interviews, and an inside look at the stocks on our radar. It's also featured on several dozen radio stations across the country.

The hosts of Motley Fool Answers challenge the conventional wisdom on life's biggest financial issues to reveal what you really need to know to make smart money moves.

David Gardner, co-founder of The Motley Fool, is among the most respected and trusted sources on investing. And he's the host of Rule Breaker Investing, in which he shares his insights into today's most innovative and disruptive companies ... and how to profit from them.

Market Foolery is our daily look at stocks in the news, as well as the top business and investing stories.

And Industry Focus offers a deeper dive into a specific industry and the stories making headlines. Healthcare, technology, energy, consumer goods, and other industries take turns in the spotlight.

They're all informative, entertaining, and eminently listenable ... and I don't say that simply because the hosts all sit within a Nerf-gun shot of my desk. Rule Breaker Investing and Answers contain timeless advice, so you might want to go back to the beginning with those. The other three take their cues from the market, so you'll want to listen to the most recent first. All are available at www.fool.com/podcasts.

But wait, there's more

The book and the podcasts – both free ... both awesome – also come with an ongoing benefit. If you download the book, or if you enter your email address in the magical box at the podcasts page, you'll get ongoing market coverage sent straight to your inbox.

Investor Insights is valuable and enjoyable coverage of everything from macroeconomic events to investing strategies to our analyst's travels around the world to find the next big thing. Also free.

Get the book. Listen to a podcast. Sign up for Investor Insights. I'm not saying that any of those things will make you rich ... but Business Insider seems to think so.


Compare Brokers