by Beth Gaston Moon | April 2, 2012 8:30 am
Wal-Mart Stores (NYSE:WMT) is a few months away from its 50th birthday, but compared to some up-and-coming retailing rivals, it’s beginning to look much older than that. Last week, MSNBC reported that the number of Wal-Mart customers who also shop on Amazon (NASDAQ:AMZN) has risen from 25% to 50% in the last five years.
Amazon is gaining ground rapidly and could even overtake WMT as the most-shopped retailer by the 2012 holiday season, according to retail analysts. The site’s revenue increased 40.6% during the last fiscal year, compared with a much more modest growth rate of 3.4% at Wal-Mart.
Less than two weeks ago, Amazon swooped in with $775 million to acquire robot maker Kiva Systems, an acquisition Wal-Mart had been mulling over. This may have been a case of déjà vu for market watchers who remember Amazon beating out WMT in the bidding war for Quidsi, an e-commerce company that operates Diapers.com and other sites. If Wal-Mart wants to be a competitor in the e-commerce world, it can’t keep letting its chief rivals expand while it sits on the sidelines.
But let’s be real. . .Wal-Mart is beyond ubiquitous and easily one of the world’s most recognized brands. It’s still the leading retailer in terms of revenue by a country mile ($419 billion last year versus $48 billion for AMZN). Its market cap of $208 billion is more than double Amazon’s $92 billion. And it has at least five features that Amazon is lacking. (Side note: Not all of these are necessarily positive).
1. A Personal Touch
Many Wal-Mart locations still provide services you can only get in person. A hair salon, for example, or a vision center. You can get your tires rotated for $2.50 apiece. Amazon just can’t compete when it comes to the human element.
2. Respectable store brand
Products marketed under the Great Value label — adorning many grocery and home staples — aren’t half bad. These store-brand items even had a revamp last year to make them better and healthier. Bonus? They’re super cheap, giving other formidable store brands like Target’s (NYSE:TGT) Archer Farms a run for the money — literally.
3. Loyal demographic
Wal-Mart is still the center of the universe for many small towns that don’t have a lot of alternatives for grocery and clothes shopping. (Target, for example, tends to avoid setting up shop in towns with small populations). Wal-Mart is also a familiar and trusted destination for those who haven’t or don’t want to delve into online shopping. Even customers willing to buy electronics or books on Amazon will still rely on Wal-Mart for their groceries and household items.
1. Bad Rep
We all know the negative press surrounding Wal-Mart. They put Mom-and-Pop shops out of business. Their employees are overworked and underpaid. And their clientele is thought to be undesirable. While Amazon was certainly far from innocent in the downfall of Borders as well as many independent booksellers, it simply doesn’t have the stigma tied to its name.
As much as Wal-Mart works on its public image by launching projects like its sustainability index, it remains an uphill battle. Last year, “negative views of the company [surpassed] positive ones among the U.S. public,” according to data from GlobeScan.
2. Harder to Diversify
Sure, you can go to Wal-Mart and buy T-shirts, air filters and canned pineapple, but can you buy a Kate Spade bag? A Roland synthesizer? Special Pakistani chili paste? For starting out as a bookseller just about 15 years ago, Amazon has become the most diversified retailer in the world. It is truly a one-stop shopping destination, even if you want, say, chicken breasts.
Amazon is limited only by the strength and breadth of its affiliates (or “associates”). Wal-Mart is limited by the fact that it’s Wal-Mart (refer to item No. 1 of this list). That mere notion makes the odds of getting the right to sell brands such as Kate Spade slim to none.
Wal-Mart certainly won’t go down without a fight, but it needs to get better about picking its battles. Stick to what it does well at the bricks-and-morter level and think strategically (and more aggressively) when it comes to expanding e-commerce operations. Only then will it begin to loosen the chokehold of stagnancy that has kept the stock trading in a sideways range (between roughly $45 and $60) for the past 13 years.
As of this writing, Beth Gaston Moon does not own any shares mentioned here.
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