How Walmart and Target Are Fighting Back Against Amazon
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While Walmart (WMT) is getting big, Target (TGT) is getting slick.
That’s an oversimplification, but it’s also one way to think about how the retailers are pushing back against a tide-like onslaught from Amazon.com (AMZN). Walmart has the lead—but Target has some advantages, too, according to a Friday note from Cowen & Co. analyst Oliver Chen.
“Both retailers have demonstrated strong abilities to creatively innovate and leverage their infrastructure to drive digital growth and compete versus Amazon,” Chen wrote. “Walmart’s speed to market and scale have given the retailer an advantage for now.”
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• Walmart’s priorities in the coming years, according to Chen, should include growing its grocery business, partnering with more brands, and offering free delivery for more items. (Grocery pickup and delivery could account for more than a fifth of its ecommerce growth over the next few years, Cowen wrote.)
Walmart has an opportunity to “grow in importance to other parts of customer’s lives” through “partnerships in health care and pharmacy; innovation in financial services, and media related investments.” (We’ve covered some of those possibilities here, including a potential Netflix (NFLX) challenger and health care M&A.)
• Target, meanwhile, should continue to work to position itself as a customer-friendly place to shop. Chen noted investments in grocery delivery company Shipt; same-day delivery to stores; drive-up service; and lower-cost next-day delivery of various popular grocery items, which the company calls “Restock.”
“Intensifying ‘ease’ or convenience is a good customer-centric strategy,” Cowen wrote. “Management is positioning Target to become America’s easiest place to shop and leading omni-channel retailer.”
• Walmart offers a third-party marketplace where other people can sell products on the company’s platform. Target doesn’t, though that doesn’t mean it never will. Chen thinks that gives Walmart a boost.
“We do think the gap between the two will tighten over the next few years, but continue to believe Walmart’s marketplace”—where other people can sell products on the company’s platform”—“will separate the two,” he wrote.
• Cowen has a $115 target on Walmart shares (20% higher than current levels) and a $90 target on Target (just 2% of upside). Walmart and Amazon are in the Barron’s Next 50 index.
Email David Marino-Nachison at david.marino-nachison@barrons.com. Follow him at @marinonachison and follow Barron’s Next at @barronsnext.
