The secrets of Walmart’s success? Groceries, low prices and a popular e-commerce platform.
The secrets of Walmart’s success? Groceries, low prices and a popular e-commerce platform.
The country’s largest retailer will release its third-quarter earnings Tuesday, and it’s looking like Walmart will be sharing good news.
The value of its shares has jumped 60% this year. That means it’s on track to have its best year since 1999. Back then, the retailer was building a bunch of superstores and making a bigger name for itself in Canada and Mexico.
Diya Iyer with S&P Global Ratings found several secrets to Walmart’s success a quarter-century later.
“They’re the largest grocer in America,” Iyer said, adding that roughly 60% of Walmart’s business is groceries. It’s improved its delivery and curbside pickup services, and that’s made it an attractive option.
“And I think that is a lot about their own execution, actually, not just sort of natural need for cheaper groceries,” Iyer said.
Although, in this economy, the price point is a plus too, said Joe Feldman with Telsey Advisory Group.
“The consumer has money to spend and has shown resiliency all year, but they’ve definitely focused on value and basics and getting food on the table,” Feldman said.
Groceries help Walmart make other sales. Come for the onions, stay for the scarves and iPhone chargers.
“They’re seeing the customer on a regular weekly basis,” Feldman said. “And so, that is different from many others in retail that have fully discretionary assortments.”
In other words, you’re not going to buy toothpaste at Macy’s. The final not-so-secret secret to Walmart’s success:
“A digital package of services that is a worthy rival to Amazon,” said Sheraz Mian, director of research at Zacks Investment Research.
He said the site, the app, the annual membership, all that has brought in customers.
“As the lower end of the income distribution has struggled, Walmart has been able to more than offset that by attracting higher-income households,” Mian said.
Walmart’s fourth quarter is likely to be strong too. Iyer said the holiday season is shorter than usual this year, so more people will shop online — good news for Walmart’s growing e-commerce business.
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