If you give Walmart (WMT 1.85%) even a passing glance, the company of today looks more or less like the Walmart of yesteryear. The stores are still enormous warehouses offering about everything you might need at any given time, and its prices typically beat what the competition can offer. It's a formula that has made the brick-and-mortar retailer the behemoth it is.
If you take a closer, more philosophical look at the company, however, you'll also see Walmart is evolving beyond just being a low-cost seller of a lot of stuff. The company's more recent initiatives are appeals to how people think, shop, and live, with the ultimate intent to develop a deeper relationship with consumers. Five years from now Walmart will have completed its quest to become a "lifestyle brand."
With the next five years in mind, is now the time to buy Walmart stock?
Not your father's Walmart
Being a "lifestyle brand" is not a term that's tossed around a lot, but you may be more familiar with the concept than you realize.
Amazon (AMZN 2.07%), for instance, is a lifestyle brand. Its customers love the fact that their favorite online shopping destination integrates with the smart speaker sitting in their den and that the free shipping offered via a Prime subscription also includes access to a suite of on-demand video productions. Groceries are quickly becoming a big part of the mix too. Amazon's shoppers love how easy it is to use any of the company's services, while at the same time supporting causes they believe in.
Other lifestyle brands include Ikea, Apple, and to a lesser degree, Nike. All three make products that not only meet customers' basic needs but fit seamlessly into their lives and lifestyles.
Admittedly, it's not able to recreate the sort of brand fondness a company like Apple can. In ways where it can cultivate deeper relationships, however, it is.
Take healthcare for example: For years the company was content to be little more than a pharmacy. Walmart now operates around a dozen conventional health clinics not directly connected to any of its stores. It also serves as a Medicare health insurance agent.
Healthcare may be an unusual area for a retailer to step into. But given the current environment, Walmart's move is a smart one. Healthcare has not only become excessively complicated; it's also become excessively expensive. Walmart is helping in both regards, managing its nascent clinic and insurance networks the same way it runs its stores.
The world's largest retailer is also responding to the permanent consumer expectations established by the temporary COVID-19 pandemic by launching Walmart+ in September of last year.
Walmart+ is the company's answer to Amazon Prime. For a monthly fee of $12.95 or $98 per year, members enjoy similar amenities like unlimited free deliveries of online orders, use of the speedy Scan & Go app while shopping in-store, and discounts on fuel at gasoline stations affiliated with the company.
It's not quite on par with Amazon Prime; conspicuously missing is an enormous library of on-demand videos. Still, free deliveries -- often from the nearest store -- is striking a chord with busy consumers who may not have the time to shop in a Walmart store. In its most recently completed consumer survey, digital payments data provider PYMNTS estimates a little more than 60 million U.S. consumers are Walmart+ subscribers. That's still well below Prime's global headcount of over 200 million. But bear in mind Walmart+ has only been around a few months, while Prime has been up and running for years.
Other business-building lifestyle niceties Walmart shoppers are increasingly surprised to find are high-end alcoholic beverages, a genuine interest in supporting and expanding the number of third-party sellers at Walmart.com, and an experiment with at-home technology installation services. It's even dabbling in self-driving cars. None of these are ideas that would have even been considered just a few years back.
A reason to buy
Not every effort Walmart makes to evolve into a lifestyle company pans out as hoped. The retailer acquired online-only women's apparel label ModCloth in 2017, for instance, only to divest it in 2019. The digitally native brand never achieved a great deal of in-store success and even struggled online with some of its customers because the mega-retailer owned it.
More of these initiatives appear to be working than not, though, positioning the company to become something it's never really been before -- a retailer that's more than just a place to buy the basics. It's a brand that is now offering access to more premium consumer goods.
It's difficult to see any of these unlikely moves as huge growth drivers. But they are, and they're one reason why long-term investors can count on more steady progress from the world's biggest retailer. It'll just take another five years for all of this work to fully gel.