Walmart (WMT, Financial) has been a great investment over the years, but the recent rise of ecommerce has put some downward pressure on the stock.
It is true that ecommerce will into into Walmart’s business if the company doesn’t do anything about it. However, the company has taken several steps to benefit from ecommerce, which is why the stock is still a buy.
Walmart’s ShippingPass
Two years ago, consumers considered Walmart a showroom as they traversed the store, scanned their required items and then purchased them online. However, to overcome this issue, the company started trying to match the prices of Amazon (AMZN, Financial) and several other online stores in 2014.
But this was a perilous step as the company was accepting lower margins than Amazon. After that, Amazon introduced its Prime memberships available for $99 per year, which proposed superior discounts and free shipping on exclusive items. Amazon’s Prime service turned into another problem for Walmart.
Therefore, in contrast to Amazon’s Prime service, Walmart recently launched its new ShippingPass service, which permits consumers free two-day shipping on any item for just $49 per year. On the other hand, to fight against Amazon’s 30-day trial of Prime, Walmart is proposing a month of free shipping for trial consumers.
It is clear to everyone that both Walmart and Amazon offer free shipping without the need of membership, but Walmart thumps Amazon in terms of shipping times by delivering orders in four to six days compared to five to eight days required by Amazon.
Walmart initially started offering its yearly membership plan for $50, but now the company decreased it by $1, making it $49 whereas Amazon Prime is available at $99. Given the difference, Walmart should gain from this initiative.
Innovative ideas
Recently, Walmart declared its plans to use robotic shopping carts that will help customers locate products in the store. Walmart currently faces strong competition from Amazon, and implementing such innovative concepts in the store will certainly help the company to compete effectively against its rivals.
Apart from this, the company is also supporting Amazon in asking the FAA for approval to use drones for the delivery purpose. With the use of drones, it will be easy for the company to deliver the products to customers easily and faster, and it could eradicate tiresome labor and save on salary expenditures.
Conclusion
All in all, Walmart is doing the best it can to fight off competition from Amazon, and the company should reap the benefits of its steps in the long run. Hence, I think Walmart is still a great buy.
Disclosure: I don't hold a position in any of the stocks mentioned in the article.
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