In recent years, Brick-and-mortar retail behemoth Walmart (WMT) has been on the receiving end of the e-commerce rise, but it has taken steps to adapt. Not only can it keep up with the times, but it may actually be able to compete better and claw back some of the business lost to popular e-tailers, most notably Amazon (AMZN).
Furthermore, it’s not just continued e-commerce investments that could fuel a multiple expansion at WMT stock. In many ways, the firm’s Walmart+ offering seems to rhyme with an earlier version of Amazon Prime.
Indeed, Walmart can’t stop at just quick delivery of physical goods, though. It needs to do more to take the growth at Walmart+ to the next level. The brick-and-mortar retailer may have to offer intriguing tech services to its arsenal to improve the underlying value proposition of Walmart+, especially amid ongoing COVID-induced pressures that may not be so quick to fade in the new year.
I think Walmart has the technological capabilities to become an omnichannel powerhouse over the coming years, as it looks to take a page out of Amazon’s Prime playbook with its Walmart+ service.
With a modest 0.7 times sales multiple, I remain bullish on the stock, as it looks to make up for lost time.
Is Walmart+ Ready for Prime Time?
Amazon’s Prime service offers an incredible value for the average consumer, with Prime Video, Music, Gaming services, a complimentary monthly Twitch subscription, and a wide range of other benefits thrown in to further sweeten the Prime pot.
Indeed, it’s proven tough for many consumers to cancel their Prime memberships, even if COVID supply chain issues have lengthened delivery times for particular consumers.
In Canada, COVID’s impact has weighed heavily on delivery times and merchandise availability. Shipping times for Prime-eligible products were shrinking before the pandemic. That all changed when the insidious Coronavirus arrived.
Despite lengthened delivery times and waning supply for certain items, a concerning flood of Prime cancellations didn’t really happen. Why?
With so much must-watch content on Prime Video and other services that many subscribers have grown accustomed to, Prime has become too sticky thanks to services that go beyond shopping.
Walmart+ could become just as sticky over the coming years as it looks to tear a page out of Amazon’s playbook by adding sweeteners in the form of complementary, value-adding services. Such services could be vital to making any subscription that much stickier.
Walmart+ Needs Extra Perks to Make It Stickier
Walmart CFO Bret Biggs really focused on growing Walmart+ in a conference call held a few months ago. For now, Walmart is striving to achieve best-in-class customer service in physical and digital. With a digital third-party seller platform that falls short of Amazon’s, though, Walmart will need to go the extra mile to offer subscribers a value proposition they can’t refuse.
Indeed, a solid omnichannel experience can help Walmart differentiate itself from Amazon, with brick-and-mortar-focused membership perks such as member price on fuel. Amid COVID-19 waves, though, a growing number of consumers will choose to stay at home, bringing forth the need for more digital perks such as video, gaming, and cloud storage.
The good news is that Walmart appears to be hard at work to create its own tech-driven services behind the scenes. The company has reportedly been working on a cloud-gaming service for many years now. Whether it’ll be a perk included in the Walmart+ membership remains to be seen.
Regardless, Walmart does appear to be en route to improving its value proposition to better compete with Amazon. For that reason, Walmart stock is easy to get behind after a year of doing virtually nothing.
Wall Street’s Take
Turning to Wall Street, Walmart has a Strong Buy consensus rating, based on 15 Buys and three Holds assigned in the past three months. The average Walmart price target of $172.11 implies 23.4% upside potential.
Disclosure: Joey Frenette owned shares of Amazon at the time of publication.
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