Can Wal-Mart Beat Amazon?

On the back of yesterday's small losses, stocks opened slightly higher this morning with the S&P 500 and the narrower, price-weighted Dow Jones Industrial Average up 0.06% and 0.17%, respectively, as of 10:05 a.m. EDT. Banks reopened in Cyprus today, and things appear quiet on the European front, with major European markets solidly in the black, helping to reverse yesterday's losses.

Bricks-and-clicks, finally
Retailing giant and Dow component Wal-Mart is ramping up its e-commerce efforts in a head-to-head battle with online commerce heavyweight . On Tuesday, during a media event at Wal-Mart's California digital commerce unit, @WalmartLabs, the company announced a number of new tools and services, including self-service lockers that will enable shoppers to order goods online for pickup and payment at their local Walmart store. (Amazon already lockers at Rite Aid and Staples.)

Wal-Mart is responding to two specific threats: First, its core customer base of shoppers earning less than $60,000 per year is becoming increasingly digitally savvy, concurrent with the growth in smartphone use. Second, Amazon is encroaching onto Wal-Mart's staple product categories -- everyday items such as diapers.

But Wal-Mart isn't in this race just to protect its territory -- the opportunity is much larger than that. Because while Wal-Mart may be the 800-pound gorilla in brick-and-mortar retailing, it remains a laggard in online commerce. The company forecasts that online sales will exceed $9 billion this year, but that's less than 2% of the $491 billion analysts expect the retailer to generate in total revenue in the current fiscal year ending in January 2014. Meanwhile, analysts are expecting nearly $76 billion in revenue from Amazon this year and $92 billion in 2014. As Wal-Mart chief technology officer Jeremy King told Bloomberg Businessweek: "Amazon is always in our sights. My biggest issue is playing a catch-up game."

King, an engineer who was instrumental in building eBay's infrastructure, is an example of how seriously Wal-Mart is taking this game. According to an article in Fast Company, in 2011, tired of taking phone calls from a Wal-Mart recruiter, King said he'd consider interviewing if Wal-Mart's CEO got on the phone, thinking that would be the end of it. Instead, King found himself on a 45-minute videoconference during which CEO Mike Duke pitched him on joining Wal-Mart. King signed up in the summer of 2011, and he now runs @WalmartLabs in San Bruno, located across the street from YouTube's headquarters.

Can Wal-Mart beat Amazon at its own game? That's difficult to predict, and Wal-Mart has stumbled in this area in the past. What is certain, however, is that Wal-Mart appears very focused, and it already has an impressive command of logistics and information technology, as well as the means of its ambition. That makes it a formidable competitor that Amazon should not underestimate -- these are no Arkansas hillbillies.

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Fool contributor Alex Dumortier, CFA has no position in any stocks mentioned; you can follow him on LinkedIn. The Motley Fool recommends The Motley Fool owns shares of Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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