Walmart returns as the king of American retail

Once known for its "Everyday Low Prices," Walmart is now reclaiming lost ground from competitors like Costco and Amazon, once again becoming the focus of the retail industry.

Walmart's stock price rose 72% in 2024 and has increased 16% so far this year. Through massive investments in e-commerce and store upgrades, Walmart has not only solidified its low-income consumer base but has also successfully attracted more high-income customers.

Additionally, its e-commerce business is growing at an astonishing rate, and Walmart's paid membership program, Walmart+, is also expanding. In the face of Walmart's challenges, other retail competitors are relatively weak.

Walmart's success is attributed not only to its integration of e-commerce and offline retail but also to its long-term capital investment and technological innovation. Walmart CEO Doug McMillon stated in a recent earnings call that the company will focus on gaining market share rather than rushing for profits.

Multi-faceted Transformation Strategy

In recent years, Walmart's market share among both low-income and high-income consumer groups has been steadily increasing. A survey by Morning Consult showed that in February 2024, 89% of households with an annual income of over $100,000 shopped at Walmart, significantly up from 77% five years ago. The proportion of middle and low-income consumers is also on the rise. Among high-income consumers, Walmart's favorability has also significantly improved.

Walmart's e-commerce business is growing at an astonishing rate. According to The Wall Street Journal, as of January 2024, Walmart's e-commerce revenue (including Sam's Club and its international divisions) reached $100 billion. Although there is still a gap with Amazon, Walmart's total e-commerce revenue has reached about one-fifth of Amazon's, up from one-tenth in 2017.

Moreover, Walmart's paid membership program, Walmart+, is also growing. Data company Numerator estimates that about 12% of U.S. consumers have Walmart+ memberships, which, while still lagging behind Amazon Prime's 62%, is becoming significant. A survey by Evercore ISI Research showed that about 90% of Walmart+ members indicated they would definitely or probably renew, demonstrating high user loyalty.

Walmart's product strategy is also continuously upgrading. Last year, Walmart launched its private label Bettergoods to attract consumers with high-quality, distinctive products. A few weeks ago, Walmart's "Wirkin" bag went viral on social media and quickly sold out, becoming a hot item. Morgan Stanley analyst Simeon Gutman stated that Walmart has hired "cutting-edge merchants with experience in sourcing the best products."

The Revival Path of the Retail Giant

Walmart's success is not accidental, but the result of years of continuous investment. According to The Wall Street Journal, Walmart began its investment cycle in e-commerce and stores as early as ten years ago, ahead of its competitors. In the past three fiscal years, Walmart alone has spent over $42 billion on capital expenditures in the U.S., an increase of about 80% compared to the previous three years. These investments are primarily focused on supply chain and store upgrades.

In terms of the supply chain, Walmart has significantly improved its level of automation. According to the company, in its latest reported quarter, more than half of its distribution center throughput was automated, double that of a year ago, which has reduced the delivery cost per order in the U.S. by about 40%.

Walmart has also undertaken a large-scale renovation of its stores. RBC Capital Markets stock analyst Steven Shemesh stated:

“The store renovations are significant; they have a more upscale feel. Cleaner, better promotions, better sightlines.”

In the face of Walmart's challenges, other retail competitors are relatively weak. Due to a lack of suitable investments, dollar stores and large supermarkets have been impacted. Target has struggled to attract luxury consumers in an environment of limited disposable income, and its e-commerce investment has also been insufficient to compete with Walmart. Its stock price has fallen by 6.28% year-to-date.

Although Amazon still holds an advantage in the e-commerce sector, its physical retail presence is relatively weak, providing Walmart with further expansion opportunities. Amazon's stock price has risen by 4.61% this year.

Despite Walmart's stock price being at a high level, the company does not seem eager to pursue short-term profits. Walmart CEO Doug McMillon stated in a recent earnings call that the company will focus on gaining market share rather than rushing for profitability. Analysts believe this strategy is similar to Amazon's early development path, indicating that Walmart is preparing for long-term competition