Will Wal-Mart Overcome Amazon’s Pressure?
Himanshu is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
Amazon.com (NASDAQ: AMZN), one of the largest online shopping portals is posing a serious concern for traditional retailers as there has been a paradigm shift of buyers from in-store shopping to an online one. Buyers get the best of deals with a lot of variety, that too sitting at home. This has also given birth to a new trend, customers check out items in their local stores and end up buying it online. Hence, retailers such as Wal-Mart Stores (NYSE: WMT) are finding it difficult to perform in such circumstances.
Wal-Mart has been losing quite a lot in terms of its market share and revenue as seen in its fourth quarter results. The company’s earnings declined 15% during the quarter since customers were highly cautious about their spending. But the retailer managed to overcome the setback and performed well in its recent first quarter results experiencing a 10% surge in earnings. It has been working hard to increase its revenue by giving low prices to attract customers. Moreover, its online shopping website has been working well and now comprises 12% of its sales.
Though walmart.com is nothing new for customers, the added advantages offered by it have been a highlight. It has used its stores as an extension to its website orders. Consumers can purchase the item online and pick it up from any of the Wal-Mart stores at their convenience. Also, there are a significant number of people who are hesitant to use their credit cards online even though they use it in stores several times. Moreover, there is a delivery gap in an online transaction which is bridged only by the traditional store retailers in case of an urgent need. These act as strong positives for the store retailers.
Fight back by Other Players
Wal-Mart is not the only one which has fallen prey to “showrooming”. Industry peer Best Buy (NYSE: BBY) posed similar concerns sometime back. But it managed to come out with great earnings numbers in its recent quarter though its strategy was different from Wal-Mart. It made its cost structure as light as possible by cutting the flab making it fitter to face the competition of online shopping. It closed its large stores and is now focusing on smaller stores which are much more affordable for the retailer. In addition to that, even Best Buy is among the host of retailers who provide an in-store pickup service for the items shopped online. This also helps the shoppers save on shipping charges and eliminates the wait before they have the product in their hand.
With fight backs by the store retailers in place, the online players are also getting worried and are providing pickup facilities by shipping goods to a physical location in their delivery network. Amazon is still not affected since it offers quick deliveries with a promise of 2 day shipping to the shoppers. But with the strategic initiatives by retailers and a few disadvantages of on-the-spot need of the product and fear of using credit cards online, it’s difficult to say how long will the online players resist from opening stores. Whosoever is able to survive, one thing is for sure, customers are getting better services with each passing day.
justhimanshu has no positions in the stocks mentioned above. The Motley Fool owns shares of Amazon.com and Best Buy. 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.