Walmart (NYSE:WMT) shares have been on a six week rally since closing a 2022 low of $133.53 on Feb. 16. WMT stock is up over 10% since that time. I’ve recently talked about reasons why that trajectory is likely to continue (despite challenging economic factors), but here’s another: e-commerce.

Walmart has been making claims about prioritizing e-commerce since 1999. At that time, Amazon (NASDAQ:AMZN) had been a publicly traded company for just a few years and was primarily focused on selling books, videos, video games and consumer electronics. We all know who has really prioritized e-commerce for most of that time.

However, in 2015, Walmart began to step up its e-commerce game in earnest. It has been a long and expensive journey, but the company is at the stage where investors should be looking at e-commerce as an engine for long-term WMT stock growth.

When Walmart Dropped the Ball on E-Commerce

In 2015, Walmart decided that it was time to get serious about e-commerce. As a New York Times article at the time noted, when the company first started talking up its commitment to e-commerce in 1999, Amazon’s annual revenue was $1.6 billion compared to Walmart’s $138 billion. By 2015, Amazon had hit annual revenue of $89 billion, while Walmart’s stood at $486 billion.

While most of Amazon’s revenue at that time came from online sales, only $12.2 billion of Walmart’s came from its website.

From 1999 to 2015 WMT stock grew modestly, while AMZN shares skyrocketed, increasing in value tenfold. However, 2015 marked a turning point for WMT stock. Shares have delivered a return of over 140% during this period. A big part of that has been the company’s determination to make e-commerce succeed.

It has been a costly transition for the company. In 2016, Walmart paid the largest price to that point for an e-commerce company, acquiring online shopping site for $3.3 billion. In 2019, it was reported that Walmart would lose around $1 billion on its e-commerce operations. Last year, the company took the step of launching a new delivery service called Walmart GoLocal. The move allowed vendors using Walmart’s online marketplace to take advantage of affordable Walmart delivery, nationwide.

Georgetown University business professor Arthur Dong commented on the GoLocal announcement: “I think this announcement is a very wise move on the part of Walmart … They’ve been watching very carefully Amazon’s growth, and they also have noticed that two-thirds or more of Amazon’s sales are third-party sales.”

Walmart’s E-Commerce Division Is Becoming a Powerhouse

With the pandemic elevating the importance of online shopping to even greater heights, Walmart’s strategy to prioritize e-commerce couldn’t have come at a better time. Last year, it was estimated that Walmart e-commerce sales were growing at a rate five times the rate of Amazon’s. A big part of the Walmart advantage is its vast network of physical stores. They also act as local distribution centers for online sales. This allows the company to deliver some products to customers in a matter of hours rather than days.

The company’s fiscal 2022 full-year earnings provide the latest sign that Walmart’s e-commerce division is destined to be a growth driver for WMT stock. The company reported its online sales increased 11% last year and they are up 90% over the past two years. In comparison, in-store sales were up 6.4% and 15%, respectively.

In addition, Walmart reported adding nearly 20,000 new third-party vendors to its online marketplace.

Bottom Line on WMT Stock

I recently wrote that the rising inflation and interest rates that have turned investors against many companies in 2022 actually have the potential to drive Walmart stock higher. The company’s focus on low cost products makes it a natural choice when consumers need to save money. That stability even through tough economic times is one of the reasons I like this Portfolio Grader “B” rated stock.

However, WMT stock has considerable long-term growth potential thanks to the company’s e-commerce strategy. It was expensive, it took time to hit its stride, but it is clearly paying off.

— Louis Navellier and the InvestorPlace Research Staff

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Source: Investor Place