Investopedia/Mark Kolakowski: How Wal-Mart Is Beating Amazon At Its Own Game

How Wal-Mart Is Beating Amazon At Its Own Game By Mark Kolakowski | October 9, 2017 — 1:40 PM EDT
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Wal-Mart Stores Inc. (WMT), regarded by many investors as a slow moving brick-and-mortar retailing behemoth, is proving to be no dinosaur. It's posting faster e-commerce sales growth than Amazon.com Inc. (AMZN), projecting that its online sales will increase by up to 30% annually over the next few years, according to a detailed cover story in Barron's. The $3.3 billion acquisition last year of e-retailer Jet.com is transforming Wal-Mart into a much sleeker, faster moving competitor against Amazon, its nemesis. But the company is not stopping there. Wal-Mart is on a buying binge in the e-commerce field, and is adapting its business practices to increase its online competitiveness.

Wal-Mart's progress makes it clear that the world's largest retailer will remain a potent force even as Amazon expands its retail reach with the acquisition of grocer Whole Foods Market, putting the two companies in direct competition in yet another sector.
Wal-Mart's E-Retail Strategy

The world's largest retailer is set to post its best annual earnings growth in five years, and its stock could return 15% over the next year, per Barron's. To accelerate its online expansion, Wal-Mart offers free two-day shipping on orders costing $35 or more, while promising consumers that returning online orders in its stores will take only 30 seconds, forcing Amazon to play catch-up. In groceries, Wal-Mart already is the leading seller in the U.S., and derives over half its U.S. revenue from this category of goods. To increase its dominance, Wal-Mart offers a click-and-pickup grocery service, with its store employees speeding customers along by loading their cars. Analysts cited by Barron's indicate that the company is winning additional market share in groceries at an accelerating clip.

Source: Barron's
Speedy Returns

A key to Wal-Mart's e-commerce push is leveraging its extensive network of physical store locations. In particular, the company has a bold plan to slash the average time to process a return in its stores from five minutes to a mere 30 seconds, as described by CNBC. The program, called Mobile Express Returns, will be rolled out starting in November, initially covering items shipped by Walmart.com, but eventually also including merchandise bought in Wal-Mart stores by early 2018. Making returns of e-commerce orders quick, easy, and painless is important because about 30% of online purchases are returned, versus 9% of in-store buys, according to research cited by CNBC.

First, customers will use a smartphone app to indicate that they will be coming into a Wal-Mart store to make a return. When in the store, they will enter a dedicated Mobile Express Return lane, scan a code from the smartphone, and get a refund credited to their payment account. These lanes, originally designed for prescription and money transfer service customers, are in place in all Wal-Mart stores and ready for their additional use in processing returns.

In some cases, such as with items that are damaged or which cannot be resold once opened, the customer may receive a refund without actually returning the product. This "keep it" option has the danger of being abused, but Wal-Mart indicates to CNBC that they have invested in technology that will reduce this risk.
Amazon Playing Catch-Up

Amazon is trying to play catch-up with Wal-Mart in extending its physical presence to make returns easier. After acquiring Whole Foods Market, Amazon has begun accepting returns at these locations. Also, Kohl's Corp. (KSS) has agreed to process Amazon returns at about 80% of its department stores.

Meanwhile, Wal-Mart continues to forge ahead in online merchandising through smaller acquisitions in addition to Jet.com. These include, per Barron's: Parcel, a same-day delivery service for groceries and general merchandise in New York City; Bonobos for upscale men's clothing; ModCloth for trendy women's clothing; Moosejaw for outdoor apparel; and ShoeBuy.com.
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