Author Topic: WMT - Walmart Inc  (Read 52947 times)

vinod1

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Re: WMT - Walmart Inc
« Reply #100 on: November 02, 2015, 02:12:47 PM »

Walmart has not really focused on Online so far and their current efforts so far have been subpar.

My question is, what competitive advantage does Amazon have when it builds its distribution centers - automated with robots as they might be, why would Walmart not be able to build them if it deems them necessary? Is there anything that Amazon does in these distribution centers that Walmart would not be able to copy? They certainly can afford it and the Walton family with 50% stake would certainly be understanding if short term results need to take a back seat to protect long term viability.

Vinod

Vinod,

Here is something to think about,
WMT's distribution centers are/were their competitive advantage with respect to other retailers. The era they have grown in and the model they followed caused them to strategically locate their distribution centers such that they could most efficiently service their customers (the big box retail stores around them). It was perfect as long as customers went to the store to shop.

Enter Amzn - their distribution centers (called fulfillment centers) were built and located strategically in this era. They located them such that they could efficiently service their customers (not retail stores but direct customers).

The location of distribution centers is key in retail as it influences what inventory you carry, how much you carry and by when you can restock if necessary. Your suppliers are plugged into these systems and for both WMT and AMZN it works perfectly given their model.

Now if WMT has to replicate AMZN locations, it would clearly be very expensive. Not only that, it would be disruptive to their existing business model with suppliers- it is a classic problem incumbents face in business. That is also why you see an effort from WMT to use their retail locations as part distribution centers for their online model.(pick up from store model)

They will have to do something like MSFT did - scrap the old unwieldy internet explorer and build a totally new browser for the new gen. This is difficult to do, but certainly possible. It would take a lot of investment and patience from investors.

My difficulty with WMT is - do you think the current management is not entrenched enough to overhaul the internet strategy? I would think you need new blood to come in to make such big changes (again like MSFT)

rpadebet,

I do understand the key role of distribution centers and its historical importance in Walmart's growth and competitive advantage. But that is only part of the story. It has also cut a lot of waste in the whole distribution system.

Retailers have historically added a multitude of additional costs and charged these to suppliers. These take the form of display fees, rebates, handling charges, damage allowances, etc. These additional costs have been passed on to the consumers and the resulting revenue allowed retailers to ignore inefficient processes. Walmart has a one price policy that cuts all incentives for wastage in the supply chain. Walmart partners with its suppliers to cut out many inefficiencies in this process - this is an ongoing cycle. Sort of like say 3G.

Walmart already has relationships with suppliers and  their business processes are intertwined to reduce costs. Granted this is optimized for brick and mortar. But it does have scale and it is frequently the largest buyer of many of these suppliers so it gives them a leg up over competitors when it needs them to make changes.

Why is Walmart disadvantaged in building separate fulfillment centers to ship directly to customers if the economics made sense rather than using its stores? How is this going to be disruptive to suppliers? They would just ship both to existing warehouses and to these new warehouses (fulfillment centers) as well.

It is using current B&M stores as it might be cost effective/competitive for all we know.

If it makes sense to use fulfillment centers and they confer some competitive advantage to those using them, what would stop Walmart from building them? I am trying to understand if Amazon has some real advantages in building these that Walmart might not be able to replicate? Expensive is not really an issue with Walmart's resources.

They seem to be now focusing on eCommerce finally as they seem to have woken up to the risk from Amazon.

Vinod
« Last Edit: November 02, 2015, 02:15:48 PM by vinod1 »
The fundamental algorithm of life: repeat what works. –Charlie Munger


Schwab711

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Re: WMT - Walmart Inc
« Reply #101 on: November 02, 2015, 02:15:40 PM »
AMZN receives a fairly large hidden subsidy from Congress through USPS, which delivers packages at a loss. If Congress allowed USPS to operate completely independently then prices for shipping would go up and AMZN would lose quite a bit of their advantage. USPS shipping prices are generally much lower than FedEx/UPS even though they have operating losses.

http://www.wsj.com/articles/u-s-mail-does-the-trick-for-fedex-ups-1407182247

It's not fair for tax payers to subsidize AMZN's business expenses.

vinod1

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Re: WMT - Walmart Inc
« Reply #102 on: November 02, 2015, 02:21:19 PM »
AMZN receives a fairly large hidden subsidy from Congress through USPS, which delivers packages at a loss. If Congress allowed USPS to operate completely independently then prices for shipping would go up and AMZN would lose quite a bit of their advantage. USPS shipping prices are generally much lower than FedEx/UPS even though they have operating losses.

http://www.wsj.com/articles/u-s-mail-does-the-trick-for-fedex-ups-1407182247

It's not fair for tax payers to subsidize AMZN's business expenses.

Is there anything that prohibits Walmart or other companies from using USPS as well?

Vinod
The fundamental algorithm of life: repeat what works. –Charlie Munger

Schwab711

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Re: WMT - Walmart Inc
« Reply #103 on: November 02, 2015, 02:24:35 PM »
AMZN receives a fairly large hidden subsidy from Congress through USPS, which delivers packages at a loss. If Congress allowed USPS to operate completely independently then prices for shipping would go up and AMZN would lose quite a bit of their advantage. USPS shipping prices are generally much lower than FedEx/UPS even though they have operating losses.

http://www.wsj.com/articles/u-s-mail-does-the-trick-for-fedex-ups-1407182247

It's not fair for tax payers to subsidize AMZN's business expenses.

Is there anything that prohibits Walmart or other companies from using USPS as well?

Vinod

There business is geared towards B&M. WMT is also taking advantage of this but 100% of AMZN's sales benefit from this.

vinod1

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Re: WMT - Walmart Inc
« Reply #104 on: November 02, 2015, 02:43:55 PM »
AMZN receives a fairly large hidden subsidy from Congress through USPS, which delivers packages at a loss. If Congress allowed USPS to operate completely independently then prices for shipping would go up and AMZN would lose quite a bit of their advantage. USPS shipping prices are generally much lower than FedEx/UPS even though they have operating losses.

http://www.wsj.com/articles/u-s-mail-does-the-trick-for-fedex-ups-1407182247

It's not fair for tax payers to subsidize AMZN's business expenses.

Is there anything that prohibits Walmart or other companies from using USPS as well?

Vinod

There business is geared towards B&M. WMT is also taking advantage of this but 100% of AMZN's sales benefit from this.

Thanks!
The fundamental algorithm of life: repeat what works. –Charlie Munger

rkbabang

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Re: WMT - Walmart Inc
« Reply #105 on: November 02, 2015, 03:54:33 PM »
AMZN receives a fairly large hidden subsidy from Congress through USPS, which delivers packages at a loss. If Congress allowed USPS to operate completely independently then prices for shipping would go up and AMZN would lose quite a bit of their advantage. USPS shipping prices are generally much lower than FedEx/UPS even though they have operating losses.

http://www.wsj.com/articles/u-s-mail-does-the-trick-for-fedex-ups-1407182247

It's not fair for tax payers to subsidize AMZN's business expenses.

Is there anything that prohibits Walmart or other companies from using USPS as well?

Vinod

There business is geared towards B&M. WMT is also taking advantage of this but 100% of AMZN's sales benefit from this.

Some percentage certainly benifits, but it isn't 100%. I've been a prime member for a long time, 7 years I think, and I have packages coming to my house 3-6 times per week. I can count the times they have came by USPS rather than UPS on one hand.  Besides the two times I've received Sunday deliveries by USPS this year, I can't remember the last time an Amazon package wasn't shipped UPS to me. Maybe it is location dependent or something, but it is proof that Amazon isn't taking advantage of the subsidized shipping for 100% of their business.

fareastwarriors

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Re: WMT - Walmart Inc
« Reply #106 on: November 16, 2015, 08:48:27 AM »
Berkshire sold some Walmart during the quarter. I was hoping he added more. Maybe next quarter?

ritrading

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Re: WMT - Walmart Inc
« Reply #107 on: November 16, 2015, 09:11:15 AM »
AMZN receives a fairly large hidden subsidy from Congress through USPS, which delivers packages at a loss. If Congress allowed USPS to operate completely independently then prices for shipping would go up and AMZN would lose quite a bit of their advantage. USPS shipping prices are generally much lower than FedEx/UPS even though they have operating losses.

http://www.wsj.com/articles/u-s-mail-does-the-trick-for-fedex-ups-1407182247

It's not fair for tax payers to subsidize AMZN's business expenses.

Is there anything that prohibits Walmart or other companies from using USPS as well?

Vinod

There business is geared towards B&M. WMT is also taking advantage of this but 100% of AMZN's sales benefit from this.

Some percentage certainly benifits, but it isn't 100%. I've been a prime member for a long time, 7 years I think, and I have packages coming to my house 3-6 times per week. I can count the times they have came by USPS rather than UPS on one hand.  Besides the two times I've received Sunday deliveries by USPS this year, I can't remember the last time an Amazon package wasn't shipped UPS to me. Maybe it is location dependent or something, but it is proof that Amazon isn't taking advantage of the subsidized shipping for 100% of their business.

Just wanted to add that many packages are delivered using multiple carriers per package. I found this information in the Fedex and UPS 10-K's. FDX and UPS will often deliver to a USPS location. Then, USPS will deliver to the buyer. I made the conclusion that FDX and UPS are more efficient with moving big packages over longer distances, but USPS is more efficient in delivering packages within short distances. This makes sense since postal workers work the same route every day, so there's a sunk cost in having them visit all homes on any given day.

Also, I not sure if USPS if there is really a big subsidy for Amazon. USPS's mail segment is unprofitable, but their package segment is profitable. I suppose you could argue that their unprofitable mail segment makes their package segment more profitable.

RadMan24

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Re: WMT - Walmart Inc
« Reply #108 on: November 16, 2015, 05:46:59 PM »
Berkshire sold some Walmart during the quarter. I was hoping he added more. Maybe next quarter?

On CNBC said he sold to buy PCP. He also trimmed GS. So, he is just allocating capital.. Makes sense.

Simple Investor

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Re: WMT - Walmart Inc
« Reply #109 on: November 17, 2015, 07:53:42 AM »
I think the quarter looked good.  Same store comps continue to increase.  Obviously increased wages and costs impacting the bottom line.