Walmart Sets Amazon as its Prime Target – TheStreet

Walmart Sets Amazon as its Prime Target – TheStreet

Walmart (WMT) – Get Walmart Inc. Report and Amazon (AMZN) – Get Amazon.com, Inc. Report stand as Godzilla and King Kong of retail with Target (TGT) – Get Target Corporation Report sort standing off to the side as a meaningful player, but not a true contender for the throne. It's a fairly close competition at the top with Walmart delivering $152.9 billion in total revenue in the fourth quarter while Amazon delivered $137.4 billion and Target had a respectable, but distant $25.65 billion in total sales as of the third quarter. Target to release fourth quarter results on March 1.
In reality, Walmart has an even bigger lead over its top rival because Amazon's sales numbers include $12.7 billion in Amazon Web Services (AWS) sales while Walmart doesn't have a comparable digital division. It's not all apple to apples as Walmart did have $19.2 billion in Sam's Club sales which Amazon has no direct equivalent for, but it's very clear that Walmart has its sights set on taking on its giant digital rival.
Image source: TheStreet.
CEO Doug McMillon made it clear during his company's fourth-quarter earnings call that he believes that getting customers to come into a store is a key part of building a relationship.
"The big basket stock-up trip is important. It's foundational to our relationship with families," he said. "We earn that shopping occasion by running great stores and clubs and offering seamless pickup and delivery experiences, including for our Walmart Plus and in-home members in the U.S. Our membership offering, Walmart Plus, continues to be an important piece of what we're building."
McMillon wants to leverage his company's stores to make it easier for customers to get what they want however they want it. Doing that involves investing in a number of different ways for Walmart customers to shop.
"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," he said. "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 make the expansion happen, Walmart plans to add 3,000 associate delivery drivers. That's a direct challenge to Amazon's networks of third-party delivery vans.
"The majority of these roles will be filled by existing experienced associates. We'll be building out a fleet of all-electric delivery vans to support our delivery services and our goal of a zero-emissions logistics fleet by 2040," McMillon said. "Our flywheel is designed to serve families more broadly, deepening our relationship with them and creating a healthy mix of merchandise and services for our business."
While Walmart has to play catch up in a lot of areas, Amazon knows that it can't rest on its laurels. CFO Brian Olsavsky made it clear that the company where it's famously always "day one" has not stopped evolving during his company's fourth-quarter earnings call.
"In recent years, we've added more product selection available with fast, free, unlimited shipping, more exclusive deals and discounts, and more high-quality entertainment, including TV, movies, music, and books. Since 2018, Prime Video has tripled the number of Amazon Originals," he said.  "And this September, Prime Video will also release the highly anticipated The Lord of the Rings: The Rings of Power and become the exclusive home of Thursday Night Football as part of an historic 11-year agreement with the National Football League."
Olsavsky made it clear that Amazon does not expect offering NFL football and high-end event television will keep customers from defecting to Walmart. He made it clear that the company continues to evolve its Prime membership and find new ways to serve customers.
"Items available for Prime free shipping have increased over 50%, and members have saved billions of dollars shopping on Prime Days," he said. "This is all on top of new program benefits like prescription savings and fast, free delivery from Amazon Pharmacy and the continually growing Amazon Music catalog for Prime members, as well as Prime Reading and Prime Gaming."
Target, which has not yet reported its fourth-quarter earnings believes that its model centers on its stores.
"Consistent with recent quarters, traffic was the primary driver of this year's growth as our guests increasingly turned to Target to serve their wants and needs," said CEO Brian Cornell during the company's third-quarter earnings call. "Across our sales channels, store sales were the primary growth driver this quarter, while same-day services propelled our digital growth. Since the third quarter of 2019, prior to the pandemic, Q3 store sales have expanded by $3.8 billion, while digital sales have increased another $3.1 billion. This provides a vivid demonstration of the flexibility of our operating model to serve our guests no matter how they choose to shop."
 

source


Leave a Reply

Your email address will not be published.