Monday, November 27, 2017

"Walmart’s late-mover advantage" (WMT)

This was originally posted at 13D in late October i.e. after the move began but before the recent gap-up verticality in the stock price:

WMT Wal-Mart Stores, Inc. daily Stock Chart

From XIIID Research:

America’s largest retailer came slow to the e-commerce game. That may have been a winning decision.
Expanding into e-commerce and fighting Amazon for sales, Walmart has unveiled a flurry of new tactics and acquisitions. Since snapping up last year, the world’s largest retailer has partnered with August smart-home devices, purveyor of security cameras and doorbells, enabling customers to receive packages inside their homes while they are away. The company has just acquired Parcel, a New York City-based logistics startup for less than $10 million — an acquisition that will help it execute same-day delivery in New York City. And in November, Walmart will make it easier for customers to return their online and in-store purchases, using their mobile phones.

Walmart has been hotly criticized for being slow to the e-commerce game, and its online market share is significantly smaller than Amazon’s. But the contrarian view is that Walmart was wise to move slowly into e-commerce, given how hard it is to turn a profit. “Arguably, the greatest value from Walmart’s new acquisition strategy is that they are injecting a new mindset into the organization and jump-starting a cultural transformation that can pay vast dividends,” Forbes noted recently, adding:
“Yet mostly I am struck by the words of a venture capitalist who has been struggling mightily with how he was going to salvage a multi-million dollar investment in a “disruptive” online brand that has garnered gobs of good PR but is burning through cash with no end in sight.
As he reflected on Walmart’s most recently announced acquisition he told me this: ‘Now I wake up every day and thank God for companies like Walmart.’”
Indeed, since early 2016, when Walmart announced the closure of 269 stores as its profits and revenue stalled, the company has bounced back. Now, the very asset that once had analysts worried — many felt the company was “over- stored” — is working to Walmart’s advantage as a “New Retail” model takes shape. This new model, known as O2O, or online-to-offline, involves looping online, offline, logistics, and data into a single value chain.

To achieve it, Amazon is busy making costly investments into brick-and-mortar locations, as disruption from pure e-commerce runs it course (see WILTW, August 24, 2017). Walmart, meanwhile, is working in reverse, building a digital presence into its massive network of 4,700 stores. It is a network that puts 90% of Americans live within 10 miles of a Walmart, giving the company an edge in a moment when other e-commerce giants are “embracing physical space.” As a point of comparison, just 44% of Americans lived within 20 miles of Amazon’s network as of last year, according to Motley Fool.

Speaking at a recent investor community meeting, Walmart e-commerce CEO Marc Lore was feeling bullish: “It’s really about leveraging the unique assets to play offense…The last two years was fixing the stores. Now we are planning to win.”

Walmart needs to move quickly to seize its advantage while it can. Practically speaking, that means turning Walmart’s stores into digital shopping destinations, no matter how customers shop. This means leveraging every big-box and digital asset, from the company’s fleet of 6,700 trucks to its pricing algorithm on Over the summer, those trucks and algorithms merged when Walmart began offering discounts on 1 million items sold online and picked up in stores — a program Walmart has been able to roll out at scale, in 1,100 stores, at no charge to the customer. As Retail Dive explained it:
“Wal-Mart is probably the most efficient distributor of retail goods in the world. The idea of passing on some of that efficiency to customers in the form of extra savings for those who choose to pick up online orders in stores is a sort of offline version of the philosophies Lore introduced at Jet.”
There are other signs that Walmart stores are evolving into “all-in-one” hubs for shopping, online distribution, and even financial services, with a special eye towards the places they serve....

The foregoing is part of the reason we took issue with the otherwise lovely (even without Bess and Matt) DealBreaker last week::
"Goldman Sachs Downgrades Surging Walmart Stock Because Nobody Understands Walmart More Than Goldman Sachs"
The headline is cute, funny and wrong (remind you of anyone?)
WMT is running because their online operation is making them look like geniuses for picking up for only $3.3 billion last year....
And via 13D, September 16:
The End Of Pure E-commerce (AMZN; WMT)

Related: "Wal-Mart Unveils ‘Store No. 8’ Tech Incubator in Silicon Valley"

Also at XIID:
Are regional fulfillment centers the new U.S. job-creation engine?

I'm thinking of changing the name of the joint to The Fulfillment Center.
Maybe get a couple Kiva robots, new age music instead of a squawkbox...