Personal Finance

A Strong Case for Buying Wal-Mart

A woman with a shopping cart accesses an in-store Wal-Mart pickup tower.

As America undergoes a major retail shakeup, the winners will be the companies that can give companies what they want, when they want it, however they want it delivered.

Doing that requires scale and vision. Being big helps, but transforming into a true omnichannel model involves more than just size. A retailer has to have not only a large physical presence, but also the ability to leverage that presence to make individual deliveries.

Wal-Mart (NYSE: WMT) has all of that. The chain isn't there yet, at least not completely, but it has a blueprint that rivals Target (NYSE: TGT) and even (NASDAQ: AMZN) plan to follow.

A woman with a shopping cart accesses an in-store Wal-Mart pickup tower.

Wal-Mart is offering in-store pickup towers for picking up online orders in some of its stores. Image source: Wal-Mart.

How has shopping changed?

Consumers want convenience at a reasonable price. That used to mean having the ability to order nearly anything online and have it delivered in no more than two days or to be able to pick it up at a store near the shopper's home.

Now, convenience means something else. Shoppers want to be able to mix their digital and brick-and-mortar purchases. Buying online and returning in store was the first step of that process, but now it has become so much more. A shopper might walk into a store to look at an item and order it digitally for home delivery. He or she could also make a purchase online for immediate pickup in a store.

Shoppers want it all, and they want it all to work well. They demand the immediacy of stores with the selection of digital in every combination. That's at least partly why Amazon bought Whole Foods Market and why Target has plans to revamp many of its stores.

What is Wal-Mart doing?

Wal-Mart has fully embraced the omnichannel process by leveraging its stores as distribution centers for online orders. It has also begun implementing offers such as having store associates make deliveries, offering curbside pickup, and installing in-store kiosks for picking up online orders.

More importantly, the chain has taken a "whatever the customer wants" approach. That approach has included CEO Doug McMillon's work with digital boss Marc Lore to break down the formerly independent silos of online and brick-and-mortar.

There will be bumps along the way, but the chain has embraced the idea that making the sale and satisfying the customer matters most. When a chain frees itself from the "stores come first" mentality, it opens up the ability to be better at serving its customers better.

It's a strategy that's been working, as total revenue rose to $123.2 billion in Q3 2018, an increase of $5 billion, or 4.2%. In addition, U.S. same-store sales rose by 2.7% and the chain's U.S. e-commerce business saw net sales rise by 50%.

This may not be a straight path

Bigger is going to be better in most areas of retail, and Wal-Mart certainly has scale. The company has also done an excellent job making rapid changes, something that's not easy for an operation of its size, or for one that's been doing the same thing for so long.

That said, it's going to take Wal-Mart time to match Amazon's efficiency when it comes to digital orders. The online retailer built its supply chain to serve individual orders. Wal-Mart built its to service full stores.

Those changes are happening and as time goes on makeshift processes will become more efficient. Wal-Mart is only a few steps into a long journey, but it's pointed in the right direction.

Taking on Amazon, with its growing real-world presence, isn't going to be easy, and Target has shown recently that it's planning on following Wal-Mart's lead. Wal-Mart, however, clearly has buy-in from management, and it has shown that it's not going to be a company that clings to past glory chasing results with outdated tactics.

Wal-Mart is no longer just a chain of brick-and-mortar stores. It's a retailer that's digital when you need it to be and physical when that's what customers require. That's clearly what it's going to take to build long-term success.

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John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool's board of directors. Daniel B. Kline has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Amazon. The Motley Fool has a disclosure policy .

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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