Why Walmart+ Isn't Investors' Silver Bullet Against Amazon
Walmart's (NYSE: WMT) plan to launch a subscription service called Walmart+, which will offer unlimited fast delivery, seems like a great idea. Unfortunately, it's about 15 years too late. Since 2005, Amazon.com's (NASDAQ: AMZN) Prime service has garnered tens of millions of subscribers. Walmart hopes a similar option will allow the company to generate millions, if not billions, of dollars in subscription revenue. But Walmart's greatest asset -- its stores -- are also the primary reason why Walmart+ looks like a losing proposition from the start.
According to Morgan Stanley (NYSE: MS) analyst Simeon Gutman, there are multiple reasons to assume Walmart+ will be popular. Walmart already has tremendous online sales growth. Over the last few years, the company's U.S. revenue has increased by about 3.5% annually, yet digital sales have increased by about 40% year over year.
When it comes to overall online sales, in 2019 the top 10 online retailers took 30% market share, according to Gutman's estimates; this year, they are expected to carry 35%. Gutman assumes that Walmart+ subscribers will automatically renew their $98 annual subscription. In addition, customers paying for the service will shop with Walmart more, both online and in person, while Walmart collects recurring subscription revenue.
Source Fool.com
