Why is Walmart Catching Up To Amazon?
(This post originally appeared on Inc.)
Big business, small business, whatever. If you’re in retail, you should be paying very close attention to Walmart.
The retailing giant, which will be releasing results for its fiscal third quarter Thursday, is doing well. Very well. Earnings per share are expected to be ahead of forecasts. Revenue for the quarter should be about $2 billion higher than the same period last year. Its stock price has rallied about 15 percent in the last three months and is up about 4 percent year to date and many analysts believe it will go higher this week.
But hey…that’s in 2019. For the coming fiscal quarter, Walmart should bask in the glow of a strong holiday season. The National Retail Federation is expecting holiday retail sales in November and December – excluding automobiles, gasoline and restaurants – to increase between 4.3 and 4.8 percent over 2017, which compares with an average annual increase of 3.9 percent over the past five years. Not bad. Another survey from consulting firm Deloitte is predicting an even rosier 5 to 6 percent increase in holiday sales over last year.
But Walmart is doing something else that will significantly impact its long term results, well beyond the holidays and even the squabble with China. It’s diversifying. It’s discovering new services and products – like health – to offer. It’s making heavy investments in online commerce. It’s partnering with Microsoft to develop more ways – using artificial intelligence technology – to nurture and encourage customers to buy even before they realize they want to buy. Like Amazon, Walmart is investing in delivery services like Walmart Spark Delivery and Jet’s new three-hour grocery delivery for urban customers to get products to customers on the same day. In the meantime the company is leaving its closest competitors – JC Penney, Target, Nordstrom – in the dust. So much so that Walmart’s only true competitor is Amazon. My bet’s on Walmart.
Why? Because Walmart is embracing “click and brick.” The company is turning its more than 4,700 stores from an overhead drain into a productive asset. Walmart is equally serving those customers who want to touch, feel and hold along with those who want to browse, hover, click and buy. They’re adapting to the demands of the 2019 customer instead of demanding that the customer adapts to theirs.
As Walmart’s online sales are exploding (some analysts are expecting a 40 percent growth this quarter which would be on top of a 40 percent growth from the quarter before) Amazon is realizing that – like Walmart – it can’t just be a one channel company. Sure, selling on the internet is important. But so is selling in a physical store. That’s why Amazon is opening physical stores around the country. Unfortunately for them, they’re a little late to the game. Walmart already has the presence. Now, with some marketing, money and savvy, who knows? Maybe we’re going to Walmart.com to buy our next product instead of Amazon. Or just to a local store. Or having my wish granted on the same day. It’s happening more and more and Walmart is doing it better and better.
But forget Amazon. If you’re a retailer – big or small – than pay attention. What you’re seeing is a seismic change in your industry. To survive going forward you can’t just have a physical location. And you can’t just sell online. You need to do both.