Why I’m More Bullish on Walmart
This year has been a transformational year for Walmart. So far, Walmart hasn't been able to keep up with Amazon's digital presence, but that's about to change. Walmart has expanded outside its traditional business in a variety of ways. Here are a few reasons why I’m so bullish on Walmart.
Walmart Plus
Amazon Prime finally has some competition for the ever-growing number of online shoppers looking for fast delivery options. Walmart is launching its own paid subscription service called Walmart +. This service will include a handful of benefits:
Unlimited free delivery: Members will receive unlimited free deliveries on orders over $35, some as fast as same-day, on more than 160,000 items with in-store prices.
Scan & Go: Members can download the Walmart app, scan their products as they shop, and then use Walmart Pay to purchase the items for a contactless shopping experience.
Fuel discounts: Members get a 5-cent-per-gallon discount at more than 2,000 Walmart, Murphy Express, and Murphy USA gas stations. The same markdown will soon apply to Sam’s Club gas pumps as well.
A Walmart+ membership will cost $98 per year or $12.95 per month, including a 15-day free trial. In comparison, the price point is lower than Amazon Prime's annual cost of $119.
UBS analysts predict that Walmart+ will have 10 million subscribers by the end of 2021. Amazon Prime, which costs $119 a year, has about 150 million subscribers.
90% of Americans live within 10 miles of a Walmart. With over 4,700 stores, Walmart has the capacity and infrastructure to deliver groceries better than Amazon. Since stores are closer to customers' homes, this shorter delivery time should lower costs for Walmart and keep food fresher. Amazon offers similar services at its Whole Foods stores but doesn't have nearly the same footprint as Walmart.
TikTok Global
On September 19, TikTok, Oracle, and Walmart announced that they had reached a deal to create a new US company called TikTok Global.
“We are excited about our potential investment in and commercial agreements with TikTok Global. While there is still work to do on final agreements, we have tentatively agreed to purchase 7.5% of TikTok Global as well as enter into commercial agreements to provide our ecommerce, fulfillment, payments and other omnichannel services to TikTok Global.”
Photo by Alexander Shatov on Unsplash
Walmart has turned more than a few heads with its newly announced multibillion-dollar stake in a video app that is synonymous with young people dancing. But one thing is clear: Walmart now has something their rival Amazon does not; a social platform. Walmart wants access to consumer’s attention and their attention resides on social platforms like Facebook, Instagram, Twitter and LinkedIn.
If the deal is approved, then Walmart can sell its products directly on the app. An app that has an estimated 80 million active users per month in the United States alone. Imagine watching a TikTok video about skincare and being able to purchase that product without leaving the app. It doesn’t get much more convenient than that.
To get an idea of what Walmart might see in the short-form video app, look at Douyin, the Chinese version of TikTok. Like many social media platforms in China, Douyin has merged shopping and entertainment. Audiences tune into Douyin live streams hosted by influencers, where they show everything from lipstick to smartphones and direct consumers to buy them from Taobao, the e-commerce site owned by Alibaba.
This is the exact model Walmart is looking to replicate in the U.S.
Partnership with ThredUP
Walmart announced a new partnership with ThredUp, the upstart online thrift store. ThredUP is the leading resale platform for fashion and accessories at mass-market prices. This partnership signals that Walmart wants to enter the clothing resale market.
“We know that customers, especially millennials, are interested in shopping resale clothing. In fact, according to thredUP’s upcoming 2020 Annual Resale Report, 70% of consumers have bought or are now willing to buy secondhand.”
According to a Walmart press release, under the new deal, Walmart customers can shop nearly 750,000 second-hand items across women’s and children’s clothing and accessories. Additionally, Walmart also says that customers will get free shipping on orders of $35 or more and free returns to Walmart or ThredUP stores.
Since a large portion of e-commerce happens through search, and the incremental costs of adding additional items to a website are low, larger assortments usually lead to higher revenues in e-commerce. Essentially, a retailer captures more of the search activity of a given consumer the wider its assortment. It is the same game Amazon has been playing since its birth in the 1990s, and also why consumers start so many of their searches on Amazon.
This partnership with ThredUP allows Walmart to offer top brands at great prices. Which is 100% in line with Walmart’s brand promise of helping people save money and live better.