Wal-Mart Plans for More Innovation

Last year, Wal-Mart’s U.S. stores and Sam’s Club brought in a combined revenue of $365.4 billion, which is about ten percent of all non-automotive retail in spending in the U.S. Most of the country’s GDP depends on consumer spending. So having the market share of nearly one tenth of all retail spending is evidence of Wal-Marts size and shows how influential it can be on the economy as a whole. It affects many aspects of American’s lives including stakeholders such as suppliers, employees, and customers. For example, when Wal-Mart raised its wages to $10 per hour last year, a bunch of its competitors followed suit. However, despite a solid foothold in the retail space, Wal-Mart has sometimes been criticized in the past for not adopting new technology quickly enough. So it is currently focusing on three aspects of innovation to improve its competitiveness – growing its e-commerce business and creating a blimp-like storage facility for delivering goods to customers.

According to Seeking Alpha, Wal-Mart has “improved its digital e-commerce options this year by adding products and reducing the minimum price for free shipping.” One way to enter a new field is by taking over a smaller company that’s already familiar with the landscape. Wal-Mart Stores, Inc. and Jet.com, Inc. announced a year ago that they have entered into a definitive agreement for Walmart to acquire Jet for approximately $3 billion in cash. Furthermore, as part of this deal, $300 million of Wal-Mart shares will be paid over time. “Wal-Mart posted 1.8 percent comp growth in the second quarter, with comp traffic of 1.3 percent, and total quarterly revenue of $123.4 billion, up about 2.1 percent on a year-over-year basis. Operating income was down 3.2 percent to $5.97 billion, or down 1.6 percent on a constant currency basis.” If Wal-Mart continues to ramp up e-commerce offerings and find new efficient ways to integrate online sales with its traditional business then investors should be rewarded in the years to come.

Wal-Mart has also filed a patent for a blimp recently. This is taking a page out of Amazon’s book. Wal-Mart is planning to have floating warehouses in the sky where it can disseminate products to peoples homes. According to the patent application, Wal-Mart’s machine, which is similar to a blimp, could fly up to 1,000 feet, and it would be operated either autonomously or remotely by a human pilot. This almost sounds like science fiction but the patent describes it as “gas-filled carrier aircrafts and methods of dispersing unmanned aircraft systems in delivering products.” Wal-Mart says that currently “there is a need to improve the customer service and/or convenience for the customer. One aspect of customer service is the availability of products. The availability of products is dependent in part on the distribution of products. There are numerous ways to distribute and deliver products. Getting the product to a delivery location, however, can cause undesirable delays, can add cost and reduce revenue.” The patent will probably be approved, as Amazon was granted a similar patent just last year. We still don’t know exactly what Wal-Mart’s warehouse in the sky will look like. Maybe it will block out the sun like the solar eclipse earlier this week as it delivers packages via autonomous drones.

Wal-Mart Stores Inc, stock (NYSE:WMT) has returned 16% to investors so far this year which is quite impressive for a blue-chip, large cap company. Wall St. is obviously happy with what the retail giant is planning to do. Wal-Mart has an annual revenue of $486 billion with operating income of approximately $22.8 billion. With nearly 11,700 stores world wide WMT is a good indicator of how retail sales are performing globally.

This author holds 10 shares of WMT as of writing this post.
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