This Stock is Riding High
Sonam is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
Wal-Mart (NYSE: WMT) investors can look forward to a cheer-filled holiday season. With its stock price reaching an all-time high, it seems like the good times have already began. Wal-Mart is confident about the coming season, and that is clearly reflected in its decision to order double its number of tech products, such as iPads and tablets. It is rumored that the company already has orders for certain products in place.
In order to cash in on the holiday season ahead, Wal-Mart has planned a new marketing and expansion strategy that focuses on growth and leverage.
For one, the U.S. giant plans to maintain its current pace by adding more than 120 supercenters to its current floor space in the next fiscal year. Supercenters are hypermarkets and there are currently more than 3,000 Wal-Mart supercenters in the U.S.
Small is Powerful!
Not only that, the company aims to speed up the rollout of stores, such as Wal-Mart Express and Neighborhood Market, by adding nearly 100 more stores by 2014. This will help the multinational compete against smaller chains, such as drug stores and local dollar stores. It will also mean less money being spent on opening more stores.
Neighborhood Markets are small stores under the Wal-Mart umbrella that take up floor spaces of around 42,000 square feet each. These sell a variety of products ranging from groceries, to cosmetics, and pharmaceuticals. There are currently over 160 Neighborhood Markets in the U.S., a figure is likely to exceed 500 by the end of 2016.
Wal-Mart Express stores are mostly located in smaller cities and are smaller than Neighborhood Markets. Wal-Mart plans to end this fiscal year with a total of 12 stores in the country.
Got a couple of hours?
Further, Wal-Mart has decided to spend more on its e-commerce department, an initiative that has been highly profitable for the company. It has recently started “Wal-Mart To Go,” an online facility that promises same day delivery on online purchases, at a fee of $10. This facility is currently operational only in certain cities in the country including Northern Virginia, Philadelphia, and Minneapolis. For the purpose of delivering the products within a few hours of ordering, Wally World has chosen to work with UPS.
Darn! What do we do now?
Amazon had tried same day delivery service, but does not seem too optimistic about expanding the facility nationwide, citing financial constraints as the main reason. The world’s largest online retailer said it was trying to find a more economical way to facilitate deliveries the same day.
Amazon investors, thus, may have something to worry about. Despite its plans to add around 18 distribution centers this year, Amazon’s total count would still be negligible as compared to Wal-Mart. While Amazon has around 40 distribution centers in the U.S., Wal-Mart has more than 3,000 stores which can serve as distribution centers, which in turn would mean faster delivery. To make things worse, the Seattle based company is already facing threats from other retailers such as Best Buy and Target who are embarking on a price-matching game with Amazon, starting this November. This could spell bad times for Amazon’s investors.
On the other hand, eBay investors need not worry too much about Wal-Mart’s entry into the same-day delivery area. The online auction site tried the same facility earlier this year in San Francisco via a mobile app called “eBay Now.” With free delivery on the first three orders and $5 thereafter, eBay Now facilitates deliveries from local stores. Unlike Amazon, eBay seemed positive about the same day facility and has plans to expand soon. eBay recorded a strong third quarter with revenue climbing by 15 percent as compared to the same period last year. Of all new eBay users, nearly 800,000 in the third quarter were mobile users. Further, eBay works mainly as a selling forum with online auction bidding as its main focus, an area where it commands the highest market share.
Foolish Bottom Line
Whether Wal-Mart does well with the same day delivery option feasible or not, only time will tell. What I do feel, however, is that the company will do well, given its plans for the future coupled with its position among its competitors. Wal-Mart investors can be rest assured. This stock isn’t going to fall anytime soon!
sonamchamaria has no positions in the stocks mentioned above. The Motley Fool owns shares of Amazon.com. Motley Fool newsletter services recommend Amazon.com and eBay. 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.