Wal-Mart Stores Inc. (NYSE: WMT) has continued to be the most dominating brick and mortar force in retail, even if it is far from the most attractive and even if it has never been a great online force.  The real culprit is that Amazon.com Inc. (NASDAQ: AMZN) has taken over the e-tail sector.

Wal-Mart was given an article in the WSJ over the weekend that shows how the company has greatly reorganized its online retail unit efforts.  The unit is now being headed up by Joel Anderson, who was a former e-commerce executive for ToysRUs.com.

What is interesting about all of this rivalry is that Target Corporation (NYSE: TGT) and Costco Wholesale Corporation (NASDAQ: COST) generally tend to be considered the most direct competition of Walmart.  When you compare sales, the competition may be far less than many consider.  Costco’s 2010 sales were $77.9 billion and Target’s were $67.4 billion.  Amazon’s sales were $34.2 billion in 2010.  These are all minute compared to the $421.8 billion from Wal-Mart.

What makes Amazon so different in comparison to Wal-Mart is that Amazon is now so different from from it used to be.  Its roots as a book and CD e-commerce site with full inventory has changed and now Amazon has moved more and more to a digital model and an order processing and fulfillment destination over a warehousing company that owns all of the inventory and ships it out.  It still does that, but the focus has been on moving a price-leader model with an agnostic stance on who is ultimately selling the product.  In short, Amazon has taken part of the low-price model of Wal-Mart but avoided the stigma and avoided being the guts.  It is the face rather than the guts.

Wal-Mart has been making efforts to go more and more online and more digital.  It acquired Vudu for online video downloads.  Its Global eCommerce segment invested in Yihaodian, an eCommerce business in China.  It has also acquired the social media company called Kosmix.  The long and short of the matter is that Wal-Mart just has a long way to go and this just remains a very limited portion of its total operations.

Another ongoing issue is how Best Buy Co. Inc. (NYSE: BBY) ties into the retail operations of electronics.  Best Buy is the king of brick and mortar sales in consumer electronics and it has consistently wiped out its competition.  Wal-Mart has tried to compete here in this arena as well and has been at least a threat if not a part of the problem.

Where Amazon could be threatened by Wal-Mart online is that Amazon’s margins have been in steady decline.  Since investors consider the margin decline as an investment into the cloud and into the future, that may not be the end of the world.  If Wal-Mart does manage to be a true online success, then Amazon’s margins may come down even more.

JON C. OGG

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