It was a fairly quiet week on the Walmart front in the race for the consumer’s whole paycheck, with only one big piece of news out of the Bentonville headquarters. That may end up being a trend through next week as the world, watches for Walmart’s earnings report and the big rush of news that will come with it.
Things were a bit more active on the Amazon front, with a big infrastructure investment pushing its market cap back over the $1 trillion line, a new B2B financing partnership with Goldman Sachs potentially in the offing and its expanding stores and services menu.
So what were the loud points in an uncharacteristically quiet week in the race for the consumer's whole paycheck?
Big News of the Week: The Potential Goldman Partnership
According to reports out earlier this week, Goldman Sachs and Amazon are in discussions about possibly partnering for small and medium-sized (SMB) business lending in the U.S. The partnership would apply Goldman’s lending technology to SMB loans on Amazon’s underwriting platform, according to unnamed sources. The loans themselves would reportedly be co-branded.
The move is on-trend for both firms. In 2019, Goldman partners with Apple on the launch of the Apple Card, which the bank’s executives have stated was the “most successful credit card launch ever.” Of Goldman’s $7 billion in consumer loans and card balances in 2019, card lending accounted for “a significant portion.”
Amazon, meanwhile, has more than a toe dipped into small business lending, with more than $863 million in outstanding small business loans at the end of 2019. Loans were primarily issued to SMB merchants that sell on the site, and bank partnerships were leveraged in some foreign markets.
John Cronin, an analyst at Goodbody’s, told the Financial Times that by using banking partnerships, Amazon could “significantly extend” its SMB lending platform, “without any associated credit risk of regulatory obligations (in the context of capital and liquidity and so forth).”
Neither Amazon nor Goldman have offered confirmation of the reports, and the deal, if it comes to fruition, is not a guarantee of success for the enterprise. The SMB underwriting space is far from empty – and Amazon-Goldman will find themselves taking on players like PayPal and Square, which have invested heavily in this area.
Market Cap Watch: Back to the Trillionaire Club With Logistic Investments
Never underestimate the value of logistics. Not just for running a business smoothly – but for their actual, literal dollar value. In Amazon’s case, the value of logistics is about $1 trillion, which is the valuation the company reached again this week, after the firm’s results and investments managed to impress investors.
Out of the 51 brokerages following Amazon’s results, about half of them raised their yearly price targets. By the end of last week, shares in the company were up 9 percent to $2,036, and benchmark analysts wrote a note called “Not-so-Subtle Reminder Amazon is Still King.”
Nice review – particularly because it also noted that the eCommerce company still has a “size and capacity advantage,” before upping Amazon’s price target to $2,400.
“Amazon is easily less than halfway through transforming retail by exploiting deep fulfillment moats established over many years,” said Canaccord Genuity Analyst Michael Graham.
Amazon has regularly been in and out of the $1 trillion zone – as have Microsoft, Apple and Google parent company Alphabet – in recent months.
The Expanding Range of Amazon Offerings
Two expansion notes came out of Amazon’s stable of offerings this week. Austin residents officially went online with Amazon Fresh this week, meaning Amazon Prime members can get free two-hour grocery delivery on orders of $35 or more and one-hour delivery for $4.99.
“Customers in Austin already love having their groceries delivered from Whole Foods Market, and Amazon is excited to bring another ultrafast, convenient grocery delivery option to Prime members,” the company said in a statement.
And Austin wasn’t the only locality that saw its Amazon access expanded – the good people of New Jersey will soon have not one, but two new Amazon stores in the real world. Amazon will open two of its 4-Star stores in the Garden State, one at the Willowbrook Mall in Wayne and another at the American Dream Mall in East Rutherford. Amazon 4-Star stores carry Amazon devices, electronics, toys, books and home goods, all of which have been rated at least four stars from Amazon customers.
And while any consumer can go into a Prime store, Prime members get the best prices on the merchandise, while non-members pay list prices.
Amazon was, as always, quite busy opening, partnering and overall expanding this week. Walmart didn’t have much in the way of new rollouts – but they did announce a pretty substantial re-org.
Big News of the Week: The Central Operations Restructuring
It looks like big changes are coming to Walmart, according to an internal memo circulated by John Furner, CEO of Walmart U.S. Furner noted, among other things, that some duties will officially shift from central operations to a newly created product team that will report to Chief Customer Officer Janey Whiteside.
“We are standing up this product team – to be led by Meng Chee, EVP and chief product officer – to design great technology products and customer and associate experiences with the end user in mind. These central operations teams have made strong progress with store innovation, associate-facing technology and the rollout of online grocery pickup and delivery, and we want to see that work accelerate by seamlessly integrating our associate and customer experiences,” Furner stated in the memo.
The memo dictated several internal staff position and role changes. New Chief Operating Officer Dacona Smith will oversee store operations. Todd Harbaugh was named head of Supercenters, and Kelvin Buncum, head of Neighborhood Markets, will report to him.
“These changes will allow us to operate more efficiently and with more role clarity, and they will be effective on Feb. 1,” Furner concluded in the memo.
The announcement also outlined continued streamlining of some parts of Walmart’s eCommerce business, with a reduction of 200 staffers in the Hayneedle corporate office in Omaha, Nebraska and another round of layoffs reported in the Allswell, New York City office. Those cuts are reportedly part of Walmart’s bigger effort to bring more of its eCommerce operations back into the store.
Will Walmart’s reorganization make it a more formidable racer with Amazon? Does it offer any clues as to what will be on display in the company’s next earnings report, and perhaps foreshadow a dip in performance during holiday 2020?
Too soon to tell – but we’ll keep you updated as news breaks.