eCommerce Throwdown: Amazon vs. Wal-Mart vs. Target

Amazon is the largest online retailer in the world, but that doesn't mean it has the most potential in the eCommerce space going forward.

Jul 18, 2014 at 10:00AM
Wmt Ecomm (NASDAQ:AMZN) might be the largest online retailer in the world, and that leads to significant growth potential given the rise of the digital consumer, but Wal-Mart Stores (NYSE:WMT) and Target (NYSE:TGT) are eager to steal share.

E-commerce positioning versus net income
Below is an important list that every retail investor should keep up with. Retailers generating the most unique visitors to their sites per month:

  • sites: 164 million
  • eBay: 104 million
  • Apple websites: 90 million
  • Wal-Mart Stores: 56 million
  • Target(NYSE:TGT): 44 million

Based on that list, you might immediately say to yourself, "I don't care what this guy writes. I'm investing in Amazon!" Admittedly, this might pay off. Amazon has one of the most innovative CEOs in the world in Jeff Bezos. Based on past innovations, it's likely that more high-potential innovations are around the corner, and this could lead to top-line growth. The problem is net income.

Below is a list of Amazon's net income for its last five fiscal years:

  • 2009: $902 million
  • 2010: $1.15 billion
  • 2011: $631 million
  • 2012: ($39 million)
  • 2013: $274 million

Amazon has been in a capital investment cycle building out its business, but this has been said for many years without consistent net income growth. 

With the recent hike in the Amazon Prime membership price to $99 per year from $79 per year, Amazon might see more consistency in this area, but we still don't know if it will impact the company's revenue due to slower membership growth.

As far as Target goes, look at the past four fiscal years (we don't want to use quarters due to the data breach):

  • 2009: $2.49 billion
  • 2010: $2.92 billion
  • 2011: $2.93 billion
  • 2012: $3 billion
  • 2013: $1.97 billion

The decline in 2013 happened for three reasons: the data breach, poor performance in Canada, and a hesitant consumer. Only one of these three factors should dissipate soon (data breach). Therefore, while Target also has future potential on the bottom line, there are concerns.

Wal-Mart, on the other hand, can be summed up with ease. Despite being ranked No. 4 for unique visitors per month, it's the 16th most profitable company in the world as well as the most profitable retailer in the world. It generated $15.88 billion in net income in fiscal-year 2014. This should put investors' minds at ease since this kind of net income allows for consistent dividends and stock repurchases as well as a large safety net.

Wal-Mart's future growth channels
According to Wal-Mart's website, more than 50% of its customers own a smartphone. Therefore, it needs to capitalize on this trend. Wal-Mart has the largest collection of e-commerce data in the world, which will increase the company's odds of successful e-commerce initiatives in the future.

Currently, Wal-Mart is trying to bring the physical and online shopping experiences together on mobile devices. Wal-Mart is constantly developing mobile apps, which currently include:

  • Early Access Notifications: first to know about in-store and online specials
  • Fast & Easy Refills: reorder prescriptions and pick up in-store
  • Store Mode: weekly ad sent to phone when you're in a Wal-Mart store
  • Shopping List: add items by typing, scanning, or speaking into phone, then tally for budgeting purposes
  • Check Pricing Availability: check product price and availability online and in-store
  • Weekly Ad: product details, customer ratings and reviews, sales
  • Scanner: product information on price, ratings and reviews, other content
  • Customer Ratings and Reviews: self-explanatory
  • Store Finder: enter zip code for store information (directions, phone number, hours)
  • Shop millions of products to choose from online

Wal-Mart's e-commerce sales increased 27% in the first quarter year over year, but e-commerce isn't its only growth channel. Other growth channels include small-box stores and international expansion.

The bottom line
Wal-Mart might not be an exciting investment, but that doesn't mean it won't be a long-term winner. In fact, investing in Wal-Mart can be like watching paint dry in slow motion, but when that paint dries, you might see the image of a large green dollar sign.

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Dan Moskowitz has no position in any stocks mentioned. The Motley Fool recommends and Apple. The Motley Fool owns shares of and Apple. 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.

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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."

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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." 

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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.

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