The "Kindling" Rivalry
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Wal-Mart (NYSE: WMT) the retail giant has rekindled a rivalry with its digital competitor Amazon.
The world’s number one retailer has refused to sell Kindle tablet produced by Amazon.com (NASDAQ: AMZN). Reuters published that Bentonville on behalf of Wal-Mart has quoted “We have recently made the business decision to not carry Amazon tablets and eReaders beyond our existing inventory and purchase commitments."
The Real Story
The rivalry between these two giants is not new. Both have been competing and competing tough in the consumer market. However Wal-Mart’s recent step is said to be taken because it was wary that customers might switch to Amazon and Wal-Mart could lose its sales. It is also possible that Kindle was stopped because of the shy profit margins it was giving. It was not only Wal-Mart but also Target Corp. The third largest retailer in the country which stopped selling Kindles. Soon after the news hit the market Wal-Mart shares rose while that of Amazon fell by 0.68%.
The Background Story
Some few years ago, the world’s largest retailer didn’t fret much about the world’s largest online mall. Only about a quarter of Wal-Mart Stores customers shopped at Amazon.com. Today, however, half of Wal-Mart customers say they’ve shopped at both merchants. That’s leaving the mega-retailer—which long ago vanquished local merchandise stores and supermarkets across America—with a colossal online challenger that is tough to disregard.
Amazon seems to have the advantage as archetypal Wal-Mart's clientele bargain hunters making less than $50,000 a year -- are getting more tech savoir-faire, while some higher income Wal-Mart shoppers are also rediscovering Amazon. The online mega store, now the number two holiday shopping destination, may overhaul Wal-Mart to become number one.
The thing is that Wal-Mart is trying to perk up associations between its store inventory, website, and mobile phone apps so that additional regulars can order online and pick up their purchases at stores, which half of Web customers do already. Wal-Mart is trying new strategy, like its Pay with Cash program for Wal-Mart customers who don’t have credit cards. This allows customers to preserve their online shopping and pay via cash at the closest store.
Who rules the future?
Where Amazon outshines Wal-Mart lacks and vice versa. The former does not have the latter’s world class supply chain management, and expertise in warehousing and distribution logistics. In the same way, Wal-Mart does not excel in e-commerce. Both companies know what they have to improve in order to break through the customer’s defenses, gain market share, and grow. Wal-Mart has spent more than $300 million in the recent past acquiring web-related companies to increase the workforce and expertise for its online e-commerce business whereas Amazon spent about $4.6 billion last year building 17 fulfillment centers, and agreed to buy warehouse-robot maker Kiva Systems Inc. But presently, according to experts from a valuation and risk-reward standpoint, Wal-Mart seems a better investment choice with an estimated forward P/E of around 12x and a dividend yield of 2.5%.
indarkb has no positions in the stocks mentioned above. The Motley Fool owns shares of Amazon.com. Motley Fool newsletter services recommend Amazon.com. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.If you have questions about this post or the Fool’s blog network, click here for information.
