Will Walmart beat Amazon at E-Commerce?

Walmart (NYSE: WMT) may not defeat Amazon (NASDAQ: AMZN) in the e-commerce wars but it is thriving in the Great Retail Disruption.  

Impressively, Walmart’s app was the number one shopping application in the United States on Thanksgiving 2019, Sensor Tower estimates. Sensor Tower ranked Walmart as the number one overall shopping app and the top brick-and-mortar shopping app. However, Amazon was Sensor Tower’s number one online-only shopping app.

Americans downloaded Walmart’s App 113,000 times during the 2019 Black Friday shopping frenzy, Sensor Tower reports. That was a 23% increase over 2018.

Walmart beats Amazon in Shopping Apps

Notably, 2019 was the first year Amazon was not the number one iOS shopping app on Black Friday, TechCrunch reports. Amazon’s fall is important because it indicates some Amazon customers are switching to Walmart. In addition, shoppers are seeking an alternative to Walmart.

Both trends are good for Walmart because it shows there is competition in online shopping. Moreover, Walmart is in the best position to take dissatisfied Amazon customers.

Interestingly, Sensor Tower does not list Walmart in its list of online-only apps. I guess that is because Walmart’s app is both brick and mortar and online. Hence, you can argue Amazon cannot compete with Walmart in some categories.

Conversely, I guess people download Walmart because of name recognition. To explain, Walmart is the Amazon alternative most people are most familiar with so they search for it. Hence Walmart’s brand and reputation for low-prices are valuable assets in the digital economy.

Huge Cyberweek 2019

Sensor Tower’s Store Intelligence data shows first-time downloads of shopping apps in the U.S. App store grew by 8% or 1.8 million installs on Black Friday 2019.

Importantly, installs of the 10 most downloaded shopping apps grew by 11% or 527,000 during Black Friday. Finally, the Shopping category accounted for 28.8% of apps downloaded from the Apple (NASDAQ: AAPL) App store on Black Friday.

Walmart was ready for a huge 2019 Cyberweek. For instance, Walmart’s Cyber Week sale offered 2,000 deals, BGR reports.

Walmart’s Revenue, Income, and Gross Profit are falling

Walmart (NYSE: WMT) is making lots of money from its business. For example, Walmart reported a gross profit of $32.091 billion on Halloween 2019.

Dramatically, Walmart reported $127,991 billion in quarterly revenues on the same day. However, Walmart’s quarterly revenues were down from $130.377 billion on 31 July 2019. Plus, Walmart’s gross profit fell from $32.454 billion to $32.091 billion in the same period.

Plus, Walmart’s quarterly operating income fell from $5.583 billion on 31 July 2019 to $4.718 billion on 31 October 2019. Meanwhile, Walmart’s quarterly net income fell from $3.61 billion to $3.288 billion during the same period.

However, Walmart’s quarterly revenue growth rate rose from 1.83% in July to 2.48% in October. Hence, Walmart’s revenue growth rate is growing, but the actual revenue, income, and profits are shrinking.

How Much Cash Does Walmart Have?

Walmart’s cash flow shrank dramatically last quarter. For instance, the quarterly operating cash flow fell from $7.622 billion in July to $3.354 billion in October.

Furthermore, the quarterly free cash flow fell from $5.042 billion to $550 million in the same period. However, Walmart’s financing and investing cash flow are negative. That means Walmart is not borrowing money to finance expansion and change.

Walmart’s cash resources are tiny when compared to Amazon. Walmart had $8.606 billion in cash and equivalents on 31 October 2019. Meanwhile, Amazon had $23.255 billion in cash and equivalents and $20.146 billion in cash and short-term investments on 30 September 2019.

Can Walmart compete with Amazon?

Thus, Amazon has far more cash than Walmart so Amazon can spend more money to expand its footprint. Consequently, Amazon reported a quarterly revenue growth rate of 23.69% on 30 September 2019.

One reason why Walmart has so little cash is that Statista estimates it operates 4,769 stores in the United States. Consequently, Walmart has the massive expenses of building, maintaining, cleaning, staffing, stocking, and operating all those stores.

Therefore, Walmarts needs to reduce operating expenses at all those stores. In particular, Walmart plans to add 3,900 robots to perform “repeatable, predictable” tasks in its stores, Big Think reports. Walmart’s robot army could include 1,500 auto-c floor cleaners, 300 Auto-S shelf scanners, 900 Pickup Towers, and 1,200 FAST Unloaders.

Walmart deploys Robot Army to Cut Expenses

“This robot can do in about two-and-a-half hours what it was taking an associate around two weeks to do, which is go through all of a department and scan the merchandise and determine where are the [out of stock items], where do we need to get the merchandise, the out of stock levels, those type of things,” Walmart spokesman Ragan Dickens tells Fast Company. Apparently, Ragan was describing the Auto-S shelf scanners.

“This latest job-killing venture has the potential to destroy over 5,000 maintenance jobs in the U.S. if it is implemented in every Walmart store,” the United Food and Commercial Workers International Union’s Making Change at Walmart project claims.

Thus, Walmart is taking drastic action to cut expenses and modernize its stores. In particular, Walmart is trying to match or exceed Amazon’s expertise with robots. The robots could pull and pack delivery and pickup orders, for instance.

Walmart embraces Tech

Additionally, Walmart is experimenting with artificial intelligence and big data at its Intelligent Retail Lab (IRL) in Levitown, Long Island.

The IRL is a Walmart Neighborhood Market where artificial intelligence (AI) monitors shoppers and collects data on them. Tech Crunch claims the IRL’s computers can store 1.6 terabytes; or 1.6 bytes of data, on consumer behavior.

Thus, Walmart could harvest and profit from the oil of the 21st Century (data). For instance, Walmart could use the data to identify the best-selling delivery and pickup products. In addition, Walmart could identify the most lucrative and popular delivery products.  

Moreover, Walmart can use the data to adjust staffing, stocking, store layout, merchandise, marketing, and technology to meet customer needs. Therefore, Walmart can learn all about its customers and better meet their needs.

Is Walmart a Retail Tech Value Investment?

I think Walmart (NYSE: WMT) is a value investment at the $119.14 Mr. Market was paying for it on 10 December 2019.

Walmart offers growing revenues, great technology, growing e-commerce sales, and a massive footprint of stores. Thus Walmart is a value investment when you compare it to Amazon. Amazon (NASDAQ: AMZN) shares were trading at $1,739.21 on 10 December 2019.

In consider Walmart a retail technology value investment because it pays a dividend. Amazon, in contrast, pays no dividend. Moreover, Dividend.com credits Walmart with 44 years of dividend growth.

Walmart shareholders received a 53₵ dividend on 5 December 2019. In total, Walmart shares offered a dividend yield of 1.79%, an annualized payout of $2.12, and a payout ratio of 43.18% on 10 December 2019.

Thus, you could make money from Walmart shares even if Amazon defeats it. If you are seeking a value investment in retail technology, you need to investigate Walmart. I predict Walmart will thrive even if Amazon becomes America’s number one retailer.