This was after The New York Times wrote a misleading story saying Amazon.Com (NASDAQ:AMZN) was now bigger and selling more goods. The figure was calculated by adding the value of Amazon’s third party sales, where it doesn’t control inventory, comparing it to Walmart revenue.
Walmart is now doing the same things, meaning its revenue is also understated. Walmart’s e-commerce effort is no longer just selling goods it owns from its Web site. It’s building computing and delivery infrastructure to compete directly for the business of third-party merchants.
A Closer Look at WMT Stock
Walmart is exploiting every chink it can find in Amazon’s armor. Walmart has decades of goodwill with consumers to claim its goods are cheaper for consumers, even when ordered online.
The price of $99/year undercuts Amazon, although the monthly charge of $13 is higher. About 35% of consumers now use Walmart+, against 59% on Amazon Prime.
Home Depot (NYSE:HD) has partnered on GoLocal, a “white label” delivery service. Walmart is hiring gig drivers through a unit called Spark to compete directly with DoorDash (NYSE:DASH) and Uber (NASDAQ:UBER) in same-day delivery.
After years of trying to become a bank, Walmart is now supporting “Buy Now, Pay Later” through Affirm (NASDAQ:AFRM). It’s dropping third-party merchant commissions for 30 days when they try Walmart Marketplace.
Walmart Marketplace gets merchants in the door. It lets Walmart sell merchants advertising and even lines of credit through Goldman Sachs, the bank that recently made it a buy.
Third Party Advantages
There are distinct advantages to the third party business.
The most important is that it eliminates inventory risk. Instead of buying goods and running them to a store, Walmart now offers warehousing and delivery as a service.
Local merchants can now use it to fight Amazon for online customers. Walmart can potentially earn higher margins, building its infrastructure of warehouses, delivery vans and drivers on the cheap.
Walmart’s moves are also a blessing in disguise for Amazon. It’s hard to attack Amazon as a monopoly when there’s a larger company doing the same thing. Third-party merchants also have choices they didn’t have before. There are no exclusivity requirements on these deals.
The Bottom Line
Walmart stock is still selling at a discount to its revenues. The market cap is $414 billion, revenue this year should be $566 billion.
The profit potential in third-party and delivery is enormous. Walmart even has a cloud, a hybrid strategy combining its own data centers with Microsoft (NASDAQ:MSFT) Azure. Adobe also sells its online tools through Microsoft Azure.
Profits are not a sure thing. Walmart is still ramping up its infrastructure and buying market share. But this can’t hurt growth. Walmart is becoming an interesting speculation.
On the date of publication, Dana Blankenhorn held long position in MSFT and AMZN. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
Dana Blankenhorn has been a financial and technology journalist since 1978. He is the author of Living With Moore’s Law: Past, Present and Future available at the Amazon Kindle store. Write him at firstname.lastname@example.org or tweet him at @danablankenhorn. He writes a Substack newsletter, Facing the Future, which covers technology, markets, and politics.