The recent news about Wal-Mart Stores Inc. (NYSE: WMT) increasing third party item selling via the Walmart.com shopping portal is getting some increased traction…. But the question is really, “Should it?”…  The real fear for the Walmart critics and for those who love the online web experience of the other dominant web retailers is that Walmart might be able to take business from Amazon.com Inc. (NASDAQ: AMZN) or eBay Inc. (NASDAQ: EBAY).  While technically any company in the world can become the next biggest and best thing in any aspect of the internet, that notion is becoming harder and harder to duplicate as the internet matures.  We took a deeper look into this and it really seems that the notion that Walmart would be able to take down the rest of the major online selling universe is just not very plausible.

The new online selling for the Walmart model is that of Amazon.com, where it will house some products but the vast majority of the items will be housed, packaged, and shipped by the third party seller.  Walmart.com claims that it added nearly one million new items to its online product assortments. The Walmart Marketplace enables a select group of retailers to offer additional products to give Walmart customers more selection and convenience.

For starters, Walmart experiences the same situation online that other retailers see.  A spike in traffic during and ahead of the holiday season each year.  The problem is that their online numbers are just not very attractive.  It would be easy to blame that on the relative income or education level of Walmart’s customers compared to the rest of the web, but we don’t want to single anyone out here.  So let’s just look at some online reviews that are independent of us.

Alexa.com is a service that is owned by Amazon.com, just for a fairness disclaimer.  Walmart.com on Alexa has a ranking of #43 for US-based sites.  For comparison, eBay’s ranking was #9 and Amazon was #13.  Unlike Amazon and eBay, Walmart is trumped by free image sites, free porn sites, and free news sites.  In fairness, all of these three major players are trumped by the social media and major search sites.

On an independent audience measurement site called Quantcast which measures ‘monthly U.S. people,” Walmart looks to have shown a better improvement this summer but if you look to the data back to 2007 it looks like through time that the average traffic is declining.  This can always be skewed or there can be exceptions, but that is how the data looks on the chart. Walmart’s top month listed on Quantcast is December of 2006 when 46.9 million users were recorded, while last December’s peak was 43.5 million users.  For a comparison, Amazon.com had 61.7 million users at the peak last December and their peak back in December 2006 was listed as 67.1 million users.  eBay’s peak last December was listed as 69.1 million, but that figure is estimated as being 101 million back in December 2006.

Walmart is a behemoth and not a force that can be ignored.  Thomson Reuters has estimates for Walmart at $411.09 billion in revenues for this fiscal year (Jan-2010).  That compares to an expectation from Thompson Reuters for this year of $22.65 billion (Dec-2009) for Amazon.com and $8.47 billion for eBay.  That makes Walmart roughly 13.2-times larger than both Amazon and eBay combined.  There is a huge difference though, and that is that much of Amazon.com’s revenues are merely transaction and referral revenues and all of eBay’s relative sales are transaction and referral.  But either way, Amazon is a true pro here.  eBay may have critics, but it is very unlikely to see its auction clients try to adopt a flea market model now.

Whether investors want to chase Amazon and eBay after they have both more than doubled from 52-week lows is one thing.  But the worry here that Walmart is going to unseat either is probably a very far fetched notion.

JON C. OGG
SEPTEMBER 1, 2009

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