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Bright Future Ahead of Wal-Mart Despite Amazon’s Undying Persistence
Posted by: Muhammad Bazil (IP Logged)
Date: August 1, 2012 02:03PM

Amazon (AMZN) can be compared to the ingenious soldier who popularized gunpowder in the ancient battlefield that was all too synonymous with swords and shields. While most of the retailers in its space took some time to embrace the concept of e-commerce, it accepted the idea ages ago. As such, there is some daylight between itself and most of its competitors. All the same, Wal-Mart (WMT) has managed to sustain the lopsided battle and has a bright future ahead despite the undying persistence rallied by Amazon.

While a good section of critics may argue that my inclination is farfetched, I believe that it is based on overlooked factors. The general outlook is that Wal-Mart is not socially responsible. This idea is generated by the fact that Wal-Mart sources its goods from emerging markets and extends low paying jobs to the public. I don’t know if it is the sagging global economy or the ever increasing pressure of 21st century living, but somehow, investors are becoming more and more emotional by the day. What happened to focusing on the things that matter?

From my point of view, this highly publicized argument against Wal-Mart bears no ground whatsoever. First of all, it is not the only one that sources goods beyond the borders of the great America. Amazon also falls guilty of the same offense if such charges hold logical ground. What most people don’t see is that as a shareholder, you are bound to benefit from Wal-Mart’s ways of securing its goods. After all, the lesser it spends the larger margins it has to enjoy.

The other thing that just doesn’t seem to translate into any fashion of sense is the endless ramble about low wages. Let me raise a simple question. Do you need an honors degree and professional training to work at Wall-Mart’s storage facility as an unskilled or semi-skilled laborer? Of course you don’t. So why should Wall-Mart pay top dollar? Regardless of the degree of social responsibility demanded by the public, everyone should remember that at the end of the day business pursues profits.

Shareholders stand to benefit

The irony is that Wall-Mart’s business model pushes for the best interests of shareholders. At the end of the day, shareholders will be the ones to bask in unending glory.

Tell me if this combination rings a bell: low wages, innumerable job opportunities and affordable product. Okay, let me save you from the endless battle of wits. The combination traces to the middle income market. While the rich can afford to buy custom-made clothes and fancy electronics, the middle-income market is occasionally compelled by unavoidable circumstances to settle for "just okay." Wal-Mart manages to extend this much-needed package.

In addition to providing what is desired, Wall-Mart also provides employment opportunities for the same group of people it loyally serves. This means that as far as Wall-Mart’s market is concerned, the retail bigwig actually treads in the right direction.

In case you never knew, the middle-income incline by far extends the most favorable prospects with regard to growth. I believe that Amazon is aware of this fact. Perhaps this explains its recent activity.

Let’s take a look at the events that have shaped Wal-Mart for the past few months.

Allowing the cash option for online sales

For the past three months or so, Wal-Mart has allowed online shoppers to pick up their goods at Wal-Mart stores. While Wal-Mart has not been alone in extending this peerless option, it has been noted for taking the extra mile

Unlike most of its competitors, it avails a cash option for the "buy online and pick up at store" service. This is more than genius. I honestly lack words.

Why?

Considering that Wal-Mart serves middle-income earners, it would be in order to assume that most customers don’t want to dish out confidential financial information online. These customers fear the cyber criminals and the merciless tax collectors who always seem to lurk in the shadows. The cash option is a good call.

In addition to that, some of the people in the middle income market don’t have stable bank accounts and credit cards. This option has therefore allowed Wall-Mart to cast its nest on a bigger market share in the online frontier.

As far as competition is concerned, I also believe that Wal-Mart is perfectly placed. As of the moment, Target Corp (TGT) and Costco wholesale (COST) are looking for ways to get back into a race that is largely dominated by Amazon (the common enemy). While some of their efforts have bore fruit, their main limitation remains funds. In comparison to Wal-Mart, they are financial dwarfs.

This therefore tightens up the race to a duel: Amazon and Wal-Mart. The former may have the lead now, but I believe that Wal-Mart’s business model will be the game changer.

Providing affordable product and extending innumerable job opportunities – this is good thinking and reason enough to fuel my confidence in Wal-Mart. Given the situations, Wal-Mart is a good choice for an investor looking for growth.


Stocks Discussed: WMT, COST, TGT, AMZN,
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