Brick-and-mortar giant Walmart is spending big to counter Amazon’s increasingly aggressive encroachment on its turf.
Walmart (WMT) – Get Walmart Inc. Report has had to play catchup for years as Amazon (AMZN) – Get Amazon.com, Inc. Report has caught and passed the big box retailer as the country’s go-to shopping option.
Amazon’s exponential growth in the new millennium has similarities to Walmart’s growth in the 90’s before the internet changed everything.
Unlike Amazon, Walmart had for years been comfortable staying in its own big box lane while Amazon expanded into multiple other revenue streams.
Amazon has expanded into everything from web hosting to smart home technology to television and movie production. None of these areas are of concern to Walmart, which is just focused on being the nation’s top grocer.
But in recent years, Amazon has encroached further on Walmart by announcing plans to expand its brick and mortar footprint, coming after one of the only advantages Walmart has over Amazon in this arms race.
“I feel confident in the underlying strength of the business and our ability to deliver the growth we expect. The Walmart we’re building is becoming more impactful for our customers and members, more digital, more automated, and more diversified on the top and bottom line,” Walmart CEO Doug McMillon said during the company’s Q4 earnings call.
Walmart now seems to understand that it is in a fight for its very existence and it is spending its considerable resources to go on the offensive.
Walmart’s Battle Plan
“We’re adding capacity for pickup and delivery. We increased capacity by nearly 20% last year, and we expect to increase capacity by another 35% this year. For Walmart InHome, we recently announced an expansion of this membership service to make it available to about 30 million homes in the U.S., up from 6 million. To enable the expansion, we’re creating roles for more than 3,000 associate delivery drivers,” McMillon said.
Walmart is also expanding its third-party seller market place as part of its fight against irrelevancy, adding more than 20,000 new sellers to its platform over the last year with plans to add another 40,000 this year.
With Amazon dominating the domestic third-party seller marketplace, Walmart has also focused its marketplace attention on growth areas like India. Walmart has opened its marketplace to sellers from India and created a team there to entice sellers to onboard with Walmart.
But those items and sellers are only as valuable as Walmart’s ability to get products delivered in a timely manner, a service that Amazon has nearly perfected.
“The fact that we’re now up to 170 million items for customers is exciting and the way sellers are responding to fulfillment and seller services. And that relationship is really encouraging. So, I think marketplace is one of those areas where we can see growth, including that last-mile component that we’re building out,” McMillon said.
What the Future Holds for Walmart
Amazon recently raised prices for its Prime service, which could give Walmart some room to take market share.
That’s a tall task as Amazon Marketplace currently accounts for about a quarter of all online sales.
And now, Walmart has plans to take market share from Amazon, Meta Platforms (FB) – Get Meta Platforms Inc. Class A Report and Alphabet (GOOGL) – Get Alphabet Inc. Class A Report in the digital advertising space.
Walmart has advertised a number of new positions at its digital ad unit, Walmart Connect. (The company rebranded its digital advertising unit from the previous Walmart Media Group last year.)
Last year, Walmart also partnered with The Trade Desk (TTD) – Get Trade Desk, Inc. Class A Report, which helps facilitate purchases of digital media on various media networks and sell-side platforms, to use what it knows about its customers, to sell them ads elsewhere on the internet.
The goal is to engage with “Walmart customers on our digital properties, then retarget them across the web and on social media,” according to their website
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