In the business world in general and in the retail arena in particular, a “more is better” mindset prevails. For retailers and for some owners of retail stocks, more loyalty programs, more ways to simplify shopping, more selection, etc. are always considered better. And to be fair, quite often more of those things can indeed boost top and bottom lines.
When it comes to Walmart (NYSE:WMT) though, the owners of Walmart stock have to be as pleased about the initiatives it’s choosing not to undertake as much as the ones it is tackling.
On the surface, the idea seems a bit counterintuitive. Anything that might steer consumers away from rivals like Amazon.com (NASDAQ:AMZN) and Target (NYSE:TGT) looks good. There is a point, however, when something is so far out of an organization’s wheelhouse that it can’t be done well, so it shouldn’t be done at all. Recently, WMT CEO Doug McMillon once again demonstrated that he understand this principle very well.
Never Mind
On Thursday, Walmart unofficially confirmed that it would not develop an in-house streaming video platform that would compete with Netflix (NASDAQ:NFLX), as it had been rumored to do. Rather, WMT will continue to cultivate Vudu, which it had acquired in 2010 but has continued to operate as a standalone venture.
Moving forward with the in-house streaming idea would likely have likely forced WMT to spend a meaningful amount of money on content creation. That would have been brand new territory for the world’s biggest brick-and-mortar retailer and could have worried some owners of Walmart stock.
Walmart’s decision is not insignificant. The rise of Netflix clearly hasn’t helped the giant retailer’s sale of DVD players and DVDs. Moreover, Amazon’s video-content library, which is available to Prime members, has funneled shoppers to Amazon.com, away from Walmart’s stores. But WMT understands that it probably can’t win the content war. At best, it can enable Vudu to maintain its market share.
It’s hardly the only time that WMT has chosen not to pursue an initiative, though.
In May of last year, the company’s Scan & Go program that was supposed to make shopping at Walmart easier and faster was killed, after launching on a modest scale just a few months earlier. Owners of Walmart stock who aren’t regular patrons of its stores may not have even noticed that Scan & Go came and went, but the decision was significant nonetheless.
WMT arguably didn’t educate shoppers well enough to make Scan & Go worthwhile, but it’s unlikely that even better instructions would have enticed enough shoppers to make the project viable.
In early 2017, Walmart killed its ShippingPass program, which, for an annual fee of $49, offered free, two-day shipping of all products purchased on Walmart.com. The program was meant to give consumers an alternative to Amazon’s Prime, which costs more, but provides more benefits. But after two years, WMT recognized that ShippingPass didn’t quite resonate with shoppers .
Walmart Says, ‘”Yes!” Sometimes
But it’s not as if the company is saying, “no” to all initiatives in order to be conservative.
For instance, Walmart just agreed to partner with four more “last-mile delivery” specialists, in an effort to enhance its grocery-delivery service.
The program delivers groceries purchased online to shoppers’ doors… something Walmart would certainly like to do more of, but a task that’s proven complicated and unfruitful for the company in the past. By outsourcing the task to localized networks that can arguably do the job better than Walmart could on its own, Walmart wins, but not without risk and some added expenses.
The retailer has also made a seemingly unlikely effort to acquire higher-end apparel brands that are distinct from the kinds of clothing one usually finds in its stores and on Walmart.com. Moosejaw, Bare Necessities, Bonobos and Modcloth are just some of the labels that are now under the Walmart umbrella, even though they’re quite unlike the value-minded shtick that WMT has promoted for decades now.
That gambit appears to be working.
More than that, however, the company’s deal-making shows owners of Walmart stock that WMT can think outside the box. It’s just choosing to do so in an intelligent way. That is a breath of fresh air.
The Bottom Line on Walmart Stock
Admittedly, prudence won’t inspire the owners of Walmart stock or those who invest in any other company, for that matter. It’s difficult — if not impossible — to quantify the upside of not doing something.
That doesn’t mean that there is no upside, however. But the upside of saying, “No” affects the price of WMT stock in an indirect, often subconscious way.
Kudos to the company for knowing what’s not worth doing. A whole slew of organizations have yet to learn the lesson.
As of this writing, James Brumley did not hold a position in any of the aforementioned securities. You can follow him on Twitter, at @jbrumley.
