Analysts have wagered that Walmart (WMT) is about to begin a digital growth spurt of up to 30%, thanks to purchases of online retailers, totaling some $124 million.
"We believe Walmart is embarking on a period of sustainable 20-30%+ e-com growth driven by" acquisitions of online retailers Jet/Hayneedle, Shoebuy and Moosejaw that provide access to more upscale customers and new technologies; marketplace expansion, with more more than 35 million items, from 8 million on Jan. 16; continued Walmart initiatives including free two-day shipping on purchases of $35 or more for over 2MM items (previously required a $50 membership); and expansion of online grocery pickup, called Walmart Grocery to some 1,200 in 2018 from the current 600, they wrote in a recent Merrill Lynch report.
The Jet acquisition combined with Walmart's digital sales team creates a foundation in which it can quickly expand through bolt-on acquisitions. The ShoeBuy and MooseJaw acquisitions will quickly scale the breadth of Walmart's online product offerings.
This could just be the tip of Walmart's investments, because Walmart's vast network of physical locations gives it billions of dollars to reinvest. Its management understands that online sales are becoming increasingly important and provide a new engine for growth. And early results are promising. Walmart saw its digital sales grow 29% in its most recent quarter.
The company generated net income of $13.64 billion over the last 12 months.
As opposed to Walmart's old growth model, which realized economies of scale through quickly expanding the number of brick-and-mortar stores, the new model's goals are achieved through buying smaller online retailers, which quickly multiply customer offering.