Brick and mortar stores across the nation were plagued by what many refer to as the retail apocalypse. But supermarket giant, Walmart (NYSE:WMT) was able to rise from the ashes relatively unscathed. The company successfully leveraged its large presence in the U.S to retain investors’ confidence in the brand driving Walmart stock.
Walmart got off to a rough start at the onset of the pandemic when unstocked shelves and low employee morale were commonplace. However, the company was quick to put its woes aside and jump on the e-commerce bandwagon which drove online revenue.
This led the company’s stock price to hit new highs as investors loaded up on Walmart stock while they sheltered in place. In an effort to grow its online presence, the retailer is looking to take over the e-commerce giant, Amazon (NASDAQ:AMZN) with its very own online platform.
We recommend you stay invested in Walmart stock as the company continues to make some big plays in the virtual world.
Amazon Prime and Walmart Stock
Although Walmart was relatively slow to enter the e-commerce space, the company is making some serious headway with its new subscription service Walmart+. The service is said to rival Amazon Prime and will roll out later this month.
The Walmart+ subscription, priced at $98, will offer same-day delivery, discounts at Walmart’s gas stations and early access to products. The platform will help the retail giant capitalize on lost opportunities in the e-commerce space as virtual shopping becomes the new norm.
Investors’ reaction to the news was optimistic, to say the least as the Walmart stock price rallied just below a new 52-week high. The price is expected to get an additional boost when a second stimulus package is announced by the federal government.
Walmart’s venture into the e-commerce subscription realm comes after Amazon Prime was able to successfully capture a share of the grocery retail sector with its platform. Amazon is set to dethrone Walmart as the country’s largest retailer as it controls 44% of the e-commerce market in the U.S.
While Walmart+ is well-poised for success in today’s digital-first world, some investors have cast their doubts. Many believe the company lost its window of opportunity during March and April as customers dove into a pantry-loading frenzy.
Nevertheless, Walmart’s new subscription service is a step in the right direction for the long-haul. Online sales over the last quarter have resulted in high-profit margins for the company and while the new subscription may not result in a complete online retail takeover, Walmart can make its mark in an Amazon Prime world.
Walmart’s Streamlined Supply Chain
While Walmart+ can help the retailer become an integral part of its customer’s daily life, Walmart is making some changes behind the scenes as well. Amazon’s reigning success can be attributed to its efficient supply chain that has made same-day delivery possible. Walmart hopes to mirror this success in its own business as well.
For many years, the company relied on third-party businesses for delivery and transportation services but is looking to move these functions in-house. Having greater control over its supply chain leaves less room for error while allowing Walmart to tailor its delivery services to the customer’s needs.
In March Walmart added 500 drivers to its existing network along with an additional team to deliver groceries to the customer’s home. Moving these duties in-house is also a major reason why the retailer is expected to offer same-day delivery as part of its Walmart+ program.
While Amazon’s supply chain seemed unbreakable, the pandemic proved otherwise. A rush of online orders in May clogged the companies delivery operations. Many third-party sellers on Amazon’s platform had to take on the additional delivery costs in lieu of the disruption.
If Walmart’s efforts to move its supply chain in-house are successful, the company can leverage its extensive network to expand its delivery services to include perishables like milk and eggs- an option that Amazon Prime only offers in 15 cities across the U.S.
The Bottom Line on WMT Stock
Walmart’s distinct advantage over its competitors in the e-commerce space is the scale of its existing operations and large presence in the U.S. The company has realized the importance of leveraging its online network to drive growth and reach new markets.
With a subscription program that will rival Amazon Prime, Walmart will be able to bridge the gap by responding directly to consumer’s needs. This coupled with a more streamlined supply chain will help the company pivot its business model and become an important part of its customer’s daily life.
Walmart’s venture into e-commerce is a testament to the retailer’s lack of complacency. As it strives to remain relevant in today’s digital environment, Walmart stock is definitely worth adding to your cart for the long-haul.
Divya Premkumar has a finance degree from the University of Houston, Texas. She is a financial writer and analyst who has written stories on various financial topics from investing to personal finance. Divya has been writing for Investor Place since 2020. As of this writing, Divya Premkumar did not own any of the aforementioned stocks.