Wal-Mart Stores Inc. (WMT, Financial), the world’s largest retailer, has found its mojo as the company slowly but surely returns to revenue growth. After spending several years and several billion dollars on organically improving its online operations, Walmart abandoned that plan and took to acquisitions to keep pushing into e-commerce.
The threat for Walmart was always Amazon.com Inc. (AMZN, Financial), which has been eating into the U.S. retail market at double-digit speeds. During the most recent quarter, Amazon reported $20.66 billion in revenue, a growth of 23.51% compared to prior period. Over the 2016 holiday season, Amazon walked away with 36.9% of all online sales, completely dominating the space, while Best Buy came in second with 3.9% and Walmart was third with 2.9%.
Walmart’s renewed e-commerce push began when it bought Jet.com for $3.3 billion in August 2016, which brought Marc Lore, the founder of Jet, into the company's fold. Lore now heads Walmart’s e-commerce division, and he has been steadily building the company's e-commerce portfolio through acquisitions.
Since taking control of online operations, Lore has made four acquisitions: Hayneedle in March of last year, Shoebuy in January 2017, Moosejaw in February 2017 and ModCloth in March 2017. The company is now in the process of buying Bonobos, a men’s fashion site. The common trait of these acquisitions is they are all in niche segments within the fashion industry, except for Hayneedle, which is an online home furnishing store.
By targeting niche retailers, Walmart is appealing to specific demographic groups to help improve its online sales.Ă‚
This strategy will help the company increase its online sales volumes and keep its value differentiated from Amazon. If these companies grow on their own, it increases Walmart’s user base on the online front; if they do not, the company does not have much to lose.
This multi-pronged, offensive approach should work well for Walmart.
As it stands, Walmart is one of very few companies that has a working strategy to address Amazon’s prolonged assault on brick-and-mortar retailers. If there has ever been a time to bank on this company, it is now. Once the retailer starts to close the gap with Amazon, it is going to become harder to get in.
Disclosure: I have no positions in the stocks mentioned, and have no intention of initiating a position in the next 72 hours.
