Food Wars: How Walmart Plans to Beat Amazon

Walmart Inc. (WMT), the world's largest retailer, is partnering with delivery startups as it ramps up its fight against its rivals including e-commerce giant Inc. (AMZN), grocery leader Kroger Co. (KR) and Target Corp. (TGT), who have all doubled down on similar services. 

The Bentonville, AR-based chain will offer home delivery of groceries in 100 cities by the end of 2018 and roll out same-day delivery in New York City, as reported by the Wall Street Journal. The expansion of its home delivery service from just six cities that it provides the option for currently, will reach over 40% of U.S. households, and will be handled by providers such as Uber Technologies Inc. Walmart already offers curbside grocery pickup at 1,200 stores, set to expand to an additional 1,000 locations this year. 

'Moving Fast' With Online Strategy

The costly investment puts Walmart on the offensive in the increasingly competitive grocery space, where Amazon has made major strides with its $13.7 billion Whole Foods Market acquisition. The tech titan has been able to gain traction fast and experiment in the space due to its massive consumer reach and deep pockets, allowing the company to suffer lower margins as investors overlook short-term numbers for long-term sales prospects. Walmart, on the other hand, has struggled to appease its investors, who tend to look more closely at quarterly earnings growth. The recent initiative comes after Walmart suffered its largest daily dip in history after disappointing the Street with a deceleration in online sales in the most recent holiday quarter. (For more, see also: Why Amazon's Stock Will Rise 15% Even Amid Grocery Price Wars.)

"We're moving fast," said Tom Ward, Walmart's Vice President of digital operations, in an interview quoted by Bloomberg. "We will be pretty aggressive with it." The news illustrates a larger trend among retailers seeking to boost sales through the integration of their online and offline strategies. Getting customers to order online, where they spend an average of twice as much, has become a primary goal for traditional brick-and-mortars as they scramble to meet changing consumer shopping habits and ward off competition from Seattle-based retail behemoth Amazon. 

Amazon's Edge

Jeff Bezos's "everything store" has shown no industry is safe from disruption, from banking to healthcare and apparel. The firm has successfully leveraged its technology expertise to hedge against its rivals, using artificial intelligence (AI) and robotics to remain a few steps ahead, even in new industries. As Investopedia's Mark Kolakowski noted in a story dated July 2017, while pouring huge sums of money into R&D, Amazon has successfully used technology to replace human labor and slash costs, giving it the ability to buy goods and sell products at lower prices than its competitors.  

Walmart stock, down over 11% year-to-date (YTD), still reflects a steady 20% gain over the past five years. Amazon, on the other hand, is up nearly 37% in 2018, securing a whopping 500% return for its investors over the past half-decade. (For more, see also: Amazon vs. Wal-Mart: Who Is Winning the Robot Wars.)

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