Walmart (WMT) is successfully evolving its business model to better integrate online and in-store shopping, positioning itself to take on e-commerce giant Amazon (AMZN), in a move that could put it on the path towards even greater growth, financial firm Baird said in a research note.
The company’s vision of “creating an omni-channel retail disruptor” is “rapidly becoming reality,” Baird analyst Peter Benedict said. The firm raised its price target on Walmart from $82 to $90.
“Comprehensive business transformations often fall short of ambitious initial aspirations, but that doesn’t appear to be the case with Walmart,” the firm said after it hosted investor meetings with Walmart in Australia last week.
Baird noted that Walmart’s blending of online and in-store shopping – especially in e-commerce – has allowed the company to tap into higher revenue margin streams like advertising, memberships, marketplace, fulfillment services, and data insights. Together, these initiatives could generate around $9 billion in revenue.
Walmart’s recent quarterly earnings report revealed strong financial performance and growing appeal across income levels, particularly among higher-income households. This momentum, combined with favorable market conditions and what Baird calls “several important inflections on tap,” appears to be reinforcing Walmart’s competitive position in the retail market.
Walmart serves 150 million customers weekly, and despite broader concerns about rising prices, the company has seen no major decline in consumer behavior across its platform, Baird notes. Recently, Walmart announced plans to “rollback” prices on 7,000 items.
The retail giant’s focus on value and convenience has attracted inflation-weary consumers, particularly those from lower-income households, who typically shop at dollar stores. Walmart has also expanded its home delivery service to cover all of its stores, meeting the expectations set by e-commerce competitors. At the same time, Walmart’s growing third-party marketplace and the introduction of more premium house brands, such as Bettergoods, and even a revamp of some of its stores have appealed to those higher-earning consumers.
With these improvements in place, Walmart is well-positioned to challenge e-commerce giant Amazon. However, Baird analysts note that Walmart’s success in this arena may depend on refining certain operational details. For instance, the firm suggests that tightening food delivery windows could be a key factor in winning over online shoppers who have come to expect rapid service from e-commerce leaders.
A retail showdown could be brewing as Walmart launches its holiday shopping deals week during the same time that Amazon’s second Prime Day event takes place on October 8. Timing of the event is significant, as it forces other retailers (like Target (TGT) and Best Buy (BBY)) to offer deals to remain relevant in the market.
However, this apparent competition may be evolving into a new retail paradigm where multiple giants can thrive simultaneously.
“The old view was that Amazon and Walmart can’t both win,” Baird said. “Now there’s a view that they can both take share.”
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