Walmart (WMT -1.22%) still has its eyes locked on beating Amazon (AMZN -1.45%) in e-commerce by launching a new initiative targeting small- and medium-sized businesses (SMBs).
Called Walmart Business+, it seeks to simplify purchases made by businesses through a curated list of 100,000 products such as office supplies, furniture, food and beverage, restroom items, electronics, and classroom and facility needs.
It is yet another initiative in a series that Walmart has begun to woo businesses away from its rival, which has offered small- and medium-sized companies various services for years. While the consumer end of online shopping has hardly been conquered, consumer spending is constrained by inflation, elevated energy costs, and rising interest rates.
SMBs offer a new avenue of potential growth if Walmart can lure in new companies and steal others from Amazon.
Image source: Getty Images.
Walmart means business
Walmart Business+ is designed to challenge Amazon Business Prime. For $98 a year, customers can upgrade to the new membership program and get free shipping with no minimums, free pickup and delivery from stores with a $35 minimum purchase, rewards of 2% on orders over $250, and savings of up to 5% if the business sets up a subscription plan. SMBs can add up to five users on an account.
Amazon launched its Business Prime membership program five years ago, and while it offers access to millions of products on the site, the cost starts at $69 a year and goes up to more than $10,000 for businesses with over 100 users.
This is not Walmart's first effort. Over the last few years, it has taken a number of steps to target the SMB market. This includes:
- Launching GoLocal in partnership with Salesforce, which enabled Salesforce's retail customers to use Walmart's vast transportation network for store pickup and delivery services.
- Partnering with Adobe to offer retailers and brands access to Walmart Marketplace, which provides two-day shipping, in-store fulfillment, and pickup capabilities for their customers.
- Announcing earlier this month the expansion of its partnership with Salesforce to offer its Store Assist app, a store fulfillment technology and local delivery services app, for retailers on Salesforce Commerce Cloud and Order Management platforms.
Yet, it's a slice of the market that's getting more crowded. Shopify, for example, has also set its sights on expanding its presence in the SMB space. The Shopify Fulfillment Network gives customers the ability to offer two-day and next-day delivery as well as expanded options for storage, freight, inventory handling, and returns. It also added point-of-sale capabilities, payment options, small business loans, and multichannel opportunities for businesses to sell on social media.
Costco Wholesale and Staples are also aggressively pursuing the SMB market as is Walmart's own Sam's Club. In an interview with Bloomberg, Senior Vice President Ashley Hubka said the market is large enough that the new program won't cannibalize sales. "This will be additive to Walmart as a whole. We believe there's a really large market."
Image source: Getty Images.
A growth market
According to the U.S. Small Business Administration, there are 33.2 million small businesses in the U.S., employing 46.4% of all the country's workers. Sage, an accounting and services firm for SMBs, and The Centre for Economics and Business Research forecast the number of small- and medium-sized businesses operating in the U.S. will grow by 36,000 by 2025.
It's a potentially rich target environment to go after -- and necessary as consumer shopping habits change. While Walmart enjoyed robust sales in the third quarter, much of that was predicated on grocery items, as apparel and electronics sales slowed.
Amazon itself had a lackluster third-quarter earnings report, with online sales slowing over the past year, some of the lowest growth rates the e-commerce giant has seen in two decades.
Don't check out just yet
The SMB market may offer a chance to offset the recently slowing growth. There's enough room for multiple players in the space, making the long-term opportunity for Walmart bright.
Yet, now may not be the time to buy. The retailer trades at 44 times earnings, 10 times sales, and hundreds of times the free cash flow it produces. Walmart is a good long-term stock pick, but waiting for a better price might be the real deal for investors.
