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Can Wal-Mart Beat Amazon at its Own Game?

By Daniel B. Kline – Mar 3, 2014 at 5:47AM

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While Wal-Mart may not be cool or have the swagger of an Internet company, it's becoming a major player in online sales.

It's not hip to shop at Wal-Mart (WMT -0.34%). The company may have low prices and be the biggest retailer in the country (and the world), but it's not a cool place to shop.

Wal-Mart stores tend to smell like Subway (oddly, whether they have one or not), and the company is unlikely to ever appeal to the hipsters who refer to Target  (NYSE: TGT) as "Tar-jay," the digital trendsetters buying things from Apple (AAPL 1.19%), or even the devoted (AMZN 2.97%) fans. Despite being uncool, however, Wal-Mart has managed to become a top player in the online retail world.

"Global eCommerce sales, including acquisitions, surpassed the $10 billion mark, a 30% increase over last year," said Wal-Mart Stores CEO Doug McMillon in the company's fourth quarter earnings report. "We will continue to grow our global business by focusing on customers and serving them how they want to be served."

While nobody will ever mistake a Wal-Mart for an Apple store, Wal-Mart sold almost exactly as much online as Apple did in its very hip, cutting-edge app store.

Wait, Wal-Mart sells more than Apple online?
Wal-Mart's online sales equal those of Apple's App Store but not all of Apple, which includes retail sales through and sales in iTunes. The App Store, however, has a pretty impressive footprint as it's included on all iPhones, iPods, and iPads. In 2013, Apple sold 150 million iPhones, 71 million iPads, and 26 million iPods. That's a huge user base, and that does not even count the hundreds of millions of iPhones, iPads, and iPods that were already in the market.

Still, with all of those potential users and Apple's super-hip online buying audience, the App Store took in roughly the same $10 billion Wal-Mart did.

Look out Amazon
Apple and Wal-Mart are competitors, but only in the fact that Apple is a leading seller of digital music in its iTunes store and Wal-Mart still caters to the dwindling audience that buys physical CDs and DVDs/Blu-rays. does not sell digital music, but it does have a video-on-demand partnership with Vudu.

Amazon, which leads the pack online, reported 2013 net sales increased 22% to $74.45 billion as compared to $61.09 billion in 2012. That number dwarfs the $10 billion Wal-Mart brought in. As Amazon increasingly grows its sales outside of its original focus of books, however, its main advantage over competitors is price and the fact that you already have a log-in. Wal-Mart, which reported consolidated net sales of $473.1 billion for fiscal 2013, certainly has the buying power to compete and possesses other advantages as well.

Wal-Mart has stores
Unlike Amazon, Wal-Mart has physical locations that it can use to grow its digital brand. The company has plans to do that by using technology to improve the in-store shopping experience. Over 140 million people visit a Wal-mart store each week, so it would be silly for the company to not look to use both platforms to support each other.

"We're bridging mobile offline and online," Wal-Mmart Vice President of Mobile and Digital Wendy Bergh told CNET.

CNET also reported that more than 50% of Wal-Mart's customers own smartphones, and the number of customers who go to through a mobile device has tripled over the last year. That's a huge base of customers that could help Wal-Mart catch up to Amazon online.

Why Wal-Mart, why now?
Wal-Mart's huge retail audience were likely not Internet early adopters. As both the number of people worldwide with Internet access and the numbers comfortable making an online purchase has grown, Wal-Mart has benefited.

The company can compete with Amazon on price, and it should be able to leverage its physical locations to register customers for its websites. Wal-Mart may not be hip, but it's omnipresent and its sheer volume of stores coupled with its low prices often gains it customers who would prefer to buy things elsewhere.

Amazon may be the big boy online, but Wal-Mart has the ability to blur the lines between in-store and online shopping. That advantage should help the company continue to gain on Amazon.

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

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