Walmart Intends to Challenge Amazon's Dominance in the Market: Crucial Information for Investors
Walmart Intends to Challenge Amazon's Dominance in the Market: Crucial Information for Investors
Walmart (WMT with a 0.69% increase) remains the biggest corporation in the U.S. by sales volume, continuously expanding its revenue figures. For a brief moment, it seemed like competitor Amazon (AMZN with a 2.23% surge) was on the verge of surpassing it, but Walmart's robust performance has kept it from being toppled. This is an intense struggle between two colossal entities, both boasting over $600 billion in revenues over the past four quarters.
Walmart presented another impressive quarterly report not long ago, and the elements driving its success may shock you. Two key components aiding its growth are its enhanced e-commerce presence and improved capacity to lure higher-income customers - domains that weren't historically its strong suit. Walmart has been strategically transforming its e-commerce sector, and the outcomes are noteworthy. Could Walmart shift its focus and challenge Amazon in the e-commerce landscape?
Joining the e-commerce party late
Walmart was tardy to e-commerce's popularity boom, thus missing out on some early opportunities to assert dominance in the area. As the leading retailer in the U.S., it could have seized a competitive edge. But Walmart gradually built up a potent e-commerce business over the past few years. It was already well-prepared when shoppers shifted to online purchases during the pandemic, and while it lags behind Amazon, it holds the second spot.
During the third fiscal quarter of 2025 (ending Oct. 31), Walmart reported a 5.5% year-over-year gain in total sales, and a staggering 27% increase in e-commerce sales. In the U.S., sales increased by 5.3%, while e-commerce sales saw a 22% hike. Management highlighted several growth catalysts in its report: in-store order fulfillment, in-store pickup, advertising, and marketplace.
Internationally, e-commerce revenues surged by 43% year over year, fueled by in-store order fulfillment, in-store pickup, and marketplace. For its Sam's Club division, an American membership warehouse wholesaler akin to Costco Wholesale, e-commerce sales surged by 26%, primarily driven by in-store order fulfillment and pickup.
Management attributed much of that performance boost to its growing capacity to capture higher-income clientele through strategies such as expanding its product offerings in attractive segments. It indicated that this demographic accounted for 75% of Walmart's market share growth during the quarter.
Walmart's e-commerce division is not yet profitable, but it has the financial muscle to keep expanding it until it becomes profitable - and management remains optimistic that it will reach this milestone.
Matching up to Amazon
Walmart's e-commerce growth might be outpacing Amazon's. Although the figures are not directly comparable, Amazon's net sales from its online stores increased by 7% in the third quarter, while revenues from third-party sellers increased by 10% and advertising revenues rose by 19%.
Walmart will likely never surpass Amazon in online sales in the near future. Last year, Amazon controlled 37.6% of U.S. e-commerce sales, while Walmart only accounted for 6.4%, according to a Statista report. However, it could be capturing a larger market share, and at Walmart's scale, the revenue potential remains significant.
With its extensive network of over 4,600 stores in the U.S., Walmart has certain advantages over Amazon. Amazon cannot offer the same in-store pickup options and other omnichannel benefits that physical retailers like Walmart offer. While this may not be enough to outweigh the advantages Amazon derives from its logistics network or its Prime membership program, it ensures that Walmart will continue to claim a portion of e-commerce sales from shoppers who prefer the benefits of physical stores.
Walmart continues to be a more substantial company than Amazon, and instead of losing market share, it appears to be gaining. While I have long believed that Amazon would surpass Walmart, the gap is still closing, albeit at a slower pace than I anticipated. With its robust e-commerce segment, Walmart seems poised to stall Amazon's progress even longer.
Is Walmart stock a buy?
Walmart's spectacular results were announced concurrently with competitor Target, which experienced a contrasting situation during the same period. Its e-commerce division has surpassed the growth rates of not only Walmart but also Amazon and Costco.
However, Walmart stock has become more appealing lately. It currently trades at a P/E ratio of 36, exceeding its five-year average of 31.
Though this might not be the perfect time to buy, Walmart is a long-term investment. Moreover, it offers a reliable and consistently growing dividend. This multi-purpose stock has outperformed the market this year, with a 67% increase. Purchasing it at any time can result in steady gains over an extended period.
Walmart's strategic focus on enhancing its e-commerce presence and attracting higher-income customers has led to significant growth in its online sales. During the third fiscal quarter of 2025, Walmart reported a 27% increase in e-commerce sales, demonstrating its ability to keep pace with the e-commerce market.
To maintain this momentum and make its e-commerce division profitable, Walmart is leveraging its financial muscles, investing in areas like in-store order fulfillment, advertising, and marketplace. This strategic approach positions Walmart as a formidable competitor in the e-commerce landscape, challenging giants like Amazon.