Why Wal-Mart Stores, Inc. (WMT)’s Online Presence Will Continue To Rise

While investors haggle over whether to invest in Apple Inc. (NASDAQ:AAPL) or Google Inc (NASDAQ:GOOG), the real star of the online retail space has been streaking ahead of both companies.

Apple is currently the third largest online retailer, but by the end of 2013, Wal-Mart Stores, Inc. (NYSE:WMT) will surpass Apple Inc. (NASDAQ:AAPL) in online retail sales. This will make Wal-Mart the third largest online retailer — behind only Amazon.com, Inc. (NASDAQ:AMZN) and Staples, Inc. (NASDAQ:SPLS).

By the end of 2013 Wal-Mart Stores, Inc. (NYSE:WMT) will have online retail sales of $9 billion, exceeding Apple Inc. (NASDAQ:AAPL)’s $6.3 billion, though still far behind Amazon.com, Inc. (NASDAQ:AMZN)’s $61 billion.

Amazon has focused on growth over the last few years. This has hurt margins, but allowed the company to grow at a tremendous rate. Since 2011, that growth rate has shrunk, however. Amazon.com, Inc. (NASDAQ:AMZN) ended the fourth quarter of 2012 with a growth rate of about 22%.

AMZN Revenue Quarterly YoY Growth data by YCharts

Amazon’s declining growth rate might give investors cause for concern.

Wal-Mart Stores, Inc. (NYSE:WMT), on the other hand, is experiencing a completely opposite pattern in its online growth: in 2010 its online sales were $4.1 billion, which grew 19.5% in 2011 to $4.9 billion.

Wal-Mart’s online sales for 2012 were not disclosed. However, it is expected to reach $9 billion in online sales by the end of this year. This would be a growth rate of over 54% in a two year period, or an average of over 27% per year.

The question is whether or not Wal-Mart Stores, Inc. (NYSE:WMT) can meet these expectations and if this rapid growth will continue. I believe the answer to both is yes.

Why Wal-Mart’s online presence will continue to rise.

Wal-Mart is blending the online and in-store shopping experience. You can order and pay for items online and pick them up in stores, saving on shipping costs. This is a major advantage over Amazon.

A customer could also order online and then pay for the items when they pick them up. About 25% of Wal-Mart customers don’t have a bank account or credit/debit cards, making this option essential.

Wal-Mart Stores, Inc. (NYSE:WMT) is also working on same-day shipping through its 4,000 stores, which could serve as distribution centers. This is currently being tested in four cities.

Wal-Mart is creating a unique shopping experience through its mobile app. Customers add items to the app’s shopping cart either manually or by scanning the bar codes of items at home. When they arrive at a store the app directs them to the items, gives them coupons, lets them checkout, and also allows them to order items online if the item is out of stock in the store. According to the New York Times, “12 percent of e-commerce sales through Wal-Mart’s mobile app comes from shoppers using the app in Wal-Mart stores.”