Saturday, January 30, 2016

Is Costco Being Overcautious About Going Online?

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 About: Costco Wholesale Corporation (COST)Includes: AMZN
Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. (More...)

Summary

Costco's online business is still at 3% of overall revenue, and there are no signs that they will step up their efforts significantly in the near future.
Their experimental model in the UK is now showing signs of success, and Costco may well be getting ready to roll out initiatives in core markets like North America.
They've already got Google Express tests underway in California and New York, but the purpose is to once again drive traffic to their warehouses.
Costco (NASDAQ:COST) seems to have a penchant for hitting a billion dollars in sales within six years wherever it goes. It was the first company in the world to achieve zero to one billion in sales within six years of opening shop. Now it has repeated the feat in Australia, where sales reached $1.3 billion in 2015, exactly six years after they entered the country.
Despite it's strong overall growth and the fact that it's loyalty programs is one of the best in the world, a big question that remains unanswered is why they haven't taken to the internet in a big way.
Costco's e-Commerce initiative is a case study in and of its own. The company has an online presence in only five countries: United States, Canada, United Kingdom, Mexico and Korea. Though they already have a physical presence in Australia, Spain and Japan, their web presence doesn't extend to these markets.
Additionally, Costco's UK and Mexico online services are widely different from what they are offering in their largest market - North America.
Originally, when Costco decided jump into the e-commerce bandwagon, it did so after putting a tremendous amount of time and research into figuring out whether it was worth the effort in the first place. Costco roped in Cisco Internet Business Solutions Group to analyze global online markets and find the best possible rollout plan.
Cisco IBSG recommended Costco start its online business in the UK first, a proposal that the company accepted, and started implementing in October 2012. To this day Costco UK remains the primary test market for the company. The company offers its UK online shoppers three different ways to shop online - something that its home market users in the U.S. aren't even aware of.
In the UK a non-member can buy Costco products online but will have to pay a 5% surcharge on the checkout price. Alternatively, they can choose to pay GBP15 (~$22) as an online subscription fee and avoid the surcharge. The third method is for the regular Costco executive and business members, who can either directly shop at one of their warehouses or buy online if they prefer.
So what are some of the key differences for a UK online buyer vs warehouse buyer?
  1. Greater choice - Costco.co.uk has some products that are not available in the warehouse
  2. Higher price - Due to shipping and handling fees for delivery online products are costlier than warehouse products
  3. Exclusive offers - Costco.co.uk provides exclusive online only offers
Since the UK is still technically a "test" market for their online business, none of this can lead to an assumption of a global roll-out. Even CFO Richard Galanti admits that:
"We're doing it methodically and we're not going to go crazy out there."
From Q4 2015 Earnings Transcript
"For the fiscal year, total e-commerce sales came in just under $3.5 billion, up a little over 20% for the year. Comp sales in e-commerce, again, were also up 20% for both the fourth quarter and the fiscal year."
So, it's clear that Costco is definitely exploring online sales as a legitimate revenue earner moving forward, but it also wants to be careful about cannibalizing its warehouse business, which is a tried and tested model - and has been for several decades.
Unlike Walmart's (NYSE:WMT) attempts to "convert" its customers to online ordering and product pickup, Costco is not ready to mix its wholesale business with its web business. Case in point is the fact that they haven't begun to promote the online option to their regular shoppers, which is what they would be doing if they wanted to go the Walmart route.
What Can They Learn From Amazon?
Possibly Costco's most important "guru" in the online space is Amazon (NASDAQ:AMZN), but not in a way that leaves Amazon looking good, unfortunately. You can sometimes learn more from the master with respect to what NOT to do rather than what TO do.
Amazon's biggest problem, as I see it, is shipping costs. Amazon Prime, for example, does not offer any major discount benefits to members like Costco does, but it does offer free two-day shipping on eligible products - and that's exactly the problem with Prime even though on the outside it seems hugely popular and growing with every year.
According to one source, the average order per Prime member (excluding digital product sales) was $47.31 in June 2012. Even if we retain that figure for 2015, at a spend of $1500 that means at least 30 orders over the year.
Now, Amazon already offers free shipping for products over $35, so a Prime customer making an order of $47.31 on average merely gets upgraded to two-day shipping free of cost. The cost of that shipping for the test order that I took to the final checkout page was not what I expected:
Look at that two-day shipping cost for a $50 product. If I were an "average" Prime customer, the company would essentially be footing a bill of $13.38 X 30 orders per year, or $400!
This is what I fail to understand: how can an average $400 shipping cost per customer be supported by the $99 subscription that they currently charge?
Out of that gross mismatch is where I believe lawsuits against Amazon are coming from. I cannot imagine that a company would spend anywhere near $400 per customer from its own pocket to meet the shipping needs of each "loyal" Prime member paying $99 a year.
It just doesn't make sense.
It can make sense, however, if they're able to get several customers who order fewer than 5 products a year for every customer for on whom they're spending $400 in shipping costs. Unfortunately, they don't have much control over who orders what. The best they can do is try and distract customers with additional offers for digital products that have zero shipping costs and, therefore, higher margins.
This, I hold, is the biggest lesson Costco can learn from Amazon. As the former forays deeper into cyberspace, it needs to ensure that the criteria below are met:
  1. Their revenue from the web does not eat into warehouse sales
  2. Their shipping costs are well covered under whatever membership benefits they plan to offer
Investor-speak: Is Costco Prepared to Fight an Online Battle with Amazon?
Understandably, Costco has been acting like a visually impaired tightrope walker as it tries to grow its online footprint without cannibalizing its predictable warehouse operations. On the other hand, they've clearly identified that online sales are more profitable than warehouse sales. This iswhat CFO Galanti had to say about that in the last earnings call:
"Online sales are more lucrative, too. That boost helped pad Costco's margins, leading to a surprise rise in earnings when most analysts expected the year to end on a down note. E-commerce is definitely quite a bit more profitable than the rest of the company."
That said, Costco is not going to get crazy and start rolling out massive features for online shoppers in the United States; at least, not until it has tested all its ideas in the UK and Mexico. Once they are confident of the after-effects of a solid e-commerce platform, Costco may well choose to roll out that model in North America.
The big advantage they have here over Amazon and even Walmart is that they will have a fully tested model in a market not so different from its core earners.
The other advantage with this approach is that the company can replicate all of its technology know-how in the U.S. market to an astoundingly short turnaround time...and that will be done at a time of its choosing - not because the market dictates it should, but because it's well and truly ready for it. It's like having a nice cash balance in an overseas account and bringing it back home when the economic climate is ideal for the move.
Costco doesn't want to depend on an online business to support its bottom line. More to the point, it wants the web to add to the top line of its warehouse business.
With the Google Express delivery experiments already underway in Los Angeles, San Francisco Bay Area and Manhattan, Galanti hopes that it will ultimately bring more people to their warehouses. Even the LivingSocial website promo they ran "worked well", according to Galanti.
From an investor's perspective, these are the best indicators of a company's healthy fiscal future - a robust core business model that's growing at a steady 6%, a successful and profitable test model that can be rolled out to core markets quickly, and a cautious management team that wants to strengthen its business by exploring new channels that can add to its main offering rather than cannibalize it.

Alibaba Earnings Top Views Despite Slowing Economy in China

Revenue rises 32%, helped by increase in users, continuing surge in mobile revenue


Despite robust results, Alibaba continues to face challenges, such as intensifying competition from smaller e-commerce companies.ENLARGE
Despite robust results, Alibaba continues to face challenges, such as intensifying competition from smaller e-commerce companies. PHOTO: REUTERS
Alibaba Group Holding Ltd. posted stronger-than-expected earnings in its latest quarter despite a slowdown in China’s economy, highlighting the resilience of Chinese consumers.
The company also reached a roughly $900 million deal to sell its stake in Meituan-Dianping, China’s largest provider of food delivery, movie-ticketing and other on-demand services, according to people familiar with the situation.
Despite robust results, Alibaba continues to face challenges. For example, the company has to find ways to maintain and accelerate growth in revenue and the value of transactions made on its trading platforms when it is already the dominant player in China’s e-commerce sector, with 80% of the market. It also is facing intensifying competition from smaller but more rapidly-growing e-commerce companies, in particular JD.com Inc., a longtime rival that has been slowly gaining ground in some areas.
Shares of Alibaba fell 1.5% to $68.51 in morning trading in New York. The stock had fallen, before the earnings report Thursday, more than 30% over the past year amid concerns about the deceleration of China’s economy, which saw its growth rate moderate to 6.9% last year, the weakest annual pace in a quarter century.
But Alibaba said Thursday that its net profit for the three months ended December more than doubled to 12.5 billion yuan ($1.9 billion), including a gain from the sale of its movie-related businesses. Excluding that gain, the company said its profit rose 25%, boosted by improvements in its ability to increase the amount of money it earns from each transaction hosted on its marketplaces.
ENLARGE
Revenue rose 32% to $5.3 billion, helped in part by blockbuster sales during Singles’ Day, China’s online shopping festival in November.Alibaba said sales that day increased 54% from a year earlier, better than what many analysts had expected.
Executive Vice Chairman Joe Tsai said on a conference call that Alibaba was well-positioned to benefit from China’s shift from an investment-driven and manufacturing-heavy economy to one that is fueled by consumption and services.
“Consumption as a share of [gross domestic product] is becoming higher so we benefit from that,” Mr. Tsai said. He said that the massive shift of users accessing the Internet on mobile devices continues to help boost the use of e-commerce. “Underlying our business is a very significant secular trend, and that is really decoupling from the larger economy.”
Many analysts have said the selloff in Alibaba’s shares was unjustified because China’s online retail sector remains a rare bright spot in the slowing economy and that overall consumption remains solid. Nomura Securities analysts expect China’s overall online shopping market to grow at a 33% compound annual growth rate between last year and 2017. The Boston Consulting Group believes affluent shoppers under the age of 35 and Internet surfers will push China’s consumer market up to $6.5 trillion in sales by 2020, an increase of 54% from 2015.
Still, Alibaba faces intensifying competition in the race to provide China’s smartphone users with offline services such as dining reservations, takeout delivery and movie-ticket bookings.
Asked on the conference call about Alibaba’s plans to sell its stake in Meituan-Dianping, Mr. Tsai said Alibaba’s own online-to-offline operations, called Koubei, is doing well. “We believe a better allocation of our capital is to put our resources into Koubei and exiting Meituan is just a matter of time.”
In the latest quarter, Alibaba reported 407 million annual active buyers, up 22% from a year earlier. Mobile monthly active users increased 48% to 393 million, fueling a near tripling of its mobile revenue.
As Alibaba’s user base grew, the company managed to increase its monetization rate—the rate at which the company is able to make money from transactions hosted on its marketplace. The company said the blended monetization rate of its China retail marketplaces rose to 2.98% from 2.7% in the year-ago quarter. Its gross merchandise value—a measure of total value of e-commerce transactions on its platforms—increased 23% to $149 billion in the fourth quarter.
“These are pretty strong results,” said Henry Guo, a senior research analyst with Summit Research Partners LLC in New York.
“Based on the company’s large market share and user base, we can still see strong momentum in the company. It continues to be dominant in China despite the slowdown,” Mr. Guo said.
He said Alibaba is more representative of everyday consumer spending, which hasn’t been significantly affected by the slowdown in the broader economy.
“Investors’ concerns on economic impact on Alibaba’s quarterly results (are) likely overdone,” Mr. Guo said.
This year, Alibaba plans to refocus efforts on expanding its reach in China’s top-tier cities, Chief Executive Daniel Zhang has said. Analysts have read the repositioning as Alibaba’s efforts to better fend off competition from JD.com.

Why Big Alcohol Is Upset With Kroger Supermarkets

New shelving plan is ruffling feathers.

Kroger is shaking up the way it shelves alcohol, and the booze industry isn’t happy about it.
The major grocery store chain plans to hire a private distributor to oversee how it distributes shelf space to alcohol brands, according to The Wall Street Journal. That distributer, Southern Wine & Spirits, would unseat big producers like Anheuser-Busch InBev, which serve as “category captains” that advise Kroger in its arrangement of brands on store shelves.
Not only does the plan diminish the influence of major producers, but it asks them to pay the bills for Southern’s work. Kroger spokesman Keith Dailey said in an interview withFortune that those quarterly fees will be voluntary, but that he thinks all producers will benefit from “unbiased plans that are customer- and data-driven.”
He says the plan primarily aims to improve Krogers’ stores responsiveness to customer demands. Currently, adult beverage shelving plans are switched up only once or twice each year. With Southern independently organizing the arrangements, popular brews can make it to shelves faster. “What does this look like? It’s more local craft brews, more regional wines, more innovative new products across the entire adult beverage spectrum,” Dailey said.
But producers and associations across the alcohol industry aren’t buying it. A number of them have complained to federal regulators, the Journalreported. And though Kroger says that this plan should benefit small craft brewers—who probably weren’t being favored in blueprints designed by major producers—many are concerned that the fees could be too much of a hurdle to ever get on the shelves. Southern estimates that the shelf-planning services will cost around $12 million annually.
Kroger made a similar switch in its dry goods section more than four years ago, when it decided to let one third-party group oversee shelf-planning for products like cereal and coffee. Dailey says it made Kroger more responsive to customers, especially when Keurig’s K-Cups burst onto the scene: “If we had at that time run our coffee category the way we still run our adult beverage, there’s a good chance our customers would have had to wait for K-Cups. It could have been months, it could have been a year.”
talent

FINDING YOUR NEW SUPPLY CHAIN WORKFORCE

By Tim Foster, Managing Director, Chainalytics APAC
Companies around the world have entered 2016 with more demands on their supply chain workforces than ever before. Meanwhile, it is tough enough to fill “core” supply chain roles that require classic plan, source deliver and performance experience and skills. But in APAC--with its welter of trade pacts, economies and rapidly changing logistics environments—it is even tougher to locate key personnel who can effectively analyse supply chain data and provide actionable insights or manage supply chains with increasingly complex product portfolios, SKU proliferation or shortened product lifecycles. The flawed recruitment expectations show up in the industry stats: 60 per cent of companies now have open supply chain positions and 15 per cent of vacancies are open for more than five months.
Securing the best mix of core & new supply chain skills
The core supply chain skills referred above to will remain in demand for years to come. So needless to say, companies seeking to enhance their internal supply chain talent base will need to be better at recruiting and retaining employees in these core functions.
But finding supply chain experts with unique new skillsets can be particularly challenging. For example, it can be difficult to locate potential candidates with product development and launch experience or employees who can do supply chain scenario planning, manipulate Big Data for actionable business insights, enhance the customer experience or work with external supply chain partners. Recruiting for these positions requires an even more strategic, concerted search. But the reality is, many of these requirements are so difficult to fill there is a need to think differently about sourcing the kind of talent to drive supply chains in the future. Supply chain leaders need to consider extending the capability and competency of their teams, searching cross functionally and globally for candidates or externally through partnering to secure the expertise needed.

The fast-growing demands highlighted below will continue to shape supply chain talent recruitment and outsourcing for the next decade:
● Manage the Changing Consumer Experience: Manufacturer-consumer convergence means the gap is narrowing between companies and their customers. To be successful, many companies will need to rebuild their value chains to better reach customers and create efficiencies, manage co-existing channels to market, offer consumers choices (e.g. omni-channel), respond more quickly to compressed timelines to market and eliminate non-value adding activities within the value chain.
● Manage Partners for Increased Supply Chain Flexibility: As companies seek to address labour and resource gaps, scale manufacturing up or down, or increase operational efficiency and flexibility, they will need to locate skilled personnel who can develop and manage liaisons with 3PLs, 4PLs, contract or on-demand manufacturing or on-demand warehousing firms, temp agencies that can augment seasonal requirements, etc.
● Gather, Mine & Analyse Data for Actionable Insights: There is more data than ever, which goes double for supply chains, given increased market globalisation. But without top-notch data science skills on board—to capture and cleanse data and provide descriptive, predictive, and prescriptive analytics — no company can harness the supply chain data explosion and turn knowledge into intelligence to fuel better fact-based decisions. Great data management expertise helps to transform a supply chain into a competitive differentiator, ensuring companies move beyond reactivity to better predict supply and demand. For many firms, an outsourced data analytics function is a way to get around the talent gap.

● Employ Centers of Excellence (COEs) Effectively: Chainalytics research shows many companies need to develop better internal supply chain capabilities if they want to attract employees with management-level expertise around new supply chain competencies. One way to do this is by developing effective COEs. But right now, unfortunately, only 49 per cent of COEs are successfully fulfilling their role; the reality is, they are often politically risky, try to be all things to all people, and are dominated by governance initiatives that stymie their very mission. To be more effective, COEs need focus less on governance, invest more in training, enable information sharing and partnering with specialists to get the skills necessary to succeed. Like the data science requirement, this area is sometimes best left to external experts who can bring both objectivity and management skills, and already have the talent available to deploy.
It is an industry truism that supply chain touches all areas of business performance. And managing your supply chain effectively adds value through revenue generation, cost reduction and return on capital. When you’re engaging with and influencing the senior people at your organisation, please keep in mind that supply chains are no longer comprised of rigidly defined silos and tasks. Hierarchies are being complemented and even replaced by interdependent, networked and decentralised organisations. Supply chains are an ecosystem of people, processes and technology—a living, breathing dynamic “thing” that needs to flex, scale, grow, repair, react and take proactive steps to survive and thrive

Amazon added more than 76,000 people last year

amazon warehousesREUTERS
Amazon.Com  $587.00
AMZNChange-48.35%Change-7.60
Disclaimer
Amazon added 76,700 employees in 2015, an increase of 50% from the previous year, according to the company's latest annual filing.
That's way more employees than it's added in each of the last three years, and is also the fastest rate of employee growth since 2012, when the company grew employees 57%.
That brings the company to about 230,800 employees. So what are all those people doing?
Probably working in the company's warehouses, for the most part. Amazon actually didn't talk about employment growth per se on its earnings call on Thursday — you can read the transcript here.
But CFO Brian Olsavsky noted that the company, during the year, had added 14 fulfillment centers for a total of 123 and four sortation centers for a total of 23.
A lot of those employees were added during the first three quarters of the year. At the end of Q3, the count was at 222,400 employees, and 39,000 of them were hired in Q3 alone to prepare for the holiday rush.
Here's Amazon's total employee count at the end of each of the last few years:
2011: 56,200
2012: 88,400, growth of 32,200 (57%)
2013: 117,300, growth of 28,900 (32%)
2014: 154,100, growth of 36,800 (31%)
2015: 230,800, growth of 76,700 (50%)

Global Migration Can Make a Positive Impact on Supply Chains

The question of whether the United States and the EU will be able to replace their labor forces to remain economically viable in the global market is closely tied to immigration.

By Patrick Burnson, Executive Editor
December 15, 2015 - SCMR Editorial
Lost in some of the more passionate (often inflamed) dialogue on global migration and the challenge it poses to social stability, one can also make a good argument that immigration can mean positive long-term outcomes for supply chains both here and in the EU.
If strong supply chains translate into stronger national security – as we believe they do – then it’s time to step up and champion policies that ensure that Western World nations continue to welcome highly-motivated emigres to their shores. Two recent studies make compelling cases in support of this position.
The McKinsey Global Institute – the business and economics research arm of McKinsey & Company – posits in its paper “A Window of Opportunity for Europe,”that the EU has a solid platform for renewal, based largely on its ability to absorb a new generation of young workers. Here in the U.S., a Brookings Institution paper, “The Rise of New Immigrant Gateways,” examines trends in immigrant population growth through an updated metropolitan immigration typology, with special attention to the working age population, and the impact of immigrants on population change in metropolitan America.
Mobilizing the Workforce 
McKinsey analysts note that because ageing can erode the available labor pool, immigration can be a key driver in mobilizing the work force.
“Immigration can be a contentious political issue, but viewing policy on immigration—particularly from outside Europe—through a pro-growth lens can have significant economic benefits,” analysts allow.
“Such immigration can drive growth by expanding the workforce, increase demand and investment as more people need housing or local services, contribute to more sustainable debt levels as debt is carried on more shoulders, and reduce some of the pressure from ageing because immigrants tend to be younger and within prime working ages.”
To achieve higher immigration of people with needed skills across Europe, countries could introduce open and transparent immigration systems contingent on employment (as Sweden has done), use shortage lists (as Germany does), set up welcome centers abroad to attract skilled immigrants, and create a pan-European immigration portal, while enhancing education and integration of newcomers.
Enhanced Flexibility
At the same time, however, enhanced labor-market flexibility may be required, caution McKinsey analysts.
A number of European economies have successfully reformed their labor markets over the past decade and, as a result, reduced unemployment or increased the employed share of people of working age in other ways.
Initiatives to drive impact might include a reduction in employment protection, where
 it seems excessive, as well as in labor taxes to incentivize hiring, particularly in the 
case of younger workers (Spain used both levers in its labor-market reform), adopting more assertive active labor-market policies at the expense of passive benefits, or making wage-bargaining mechanisms more flexible. Analysts also urge EU supply chain managers to help intensify efforts to make the single labor market work in reality.
Nurturing an ecosystem for innovation, creating a single digital market, and ensuring effective education-to-employment pathways will all help Europe to ride the wave of new technologies such as next-generation genomics, advanced materials, and Industry 4.0, McKinsey analysts conclude. And by taking a pro-growth view of immigration policy, the EU can improve the competitiveness of the continent’s cities.
Metropolitan Shift
The competitive strength of U.S. cities is also examined in depth by Brookings researchers, who arrive at many of the same conclusions.
Today, more than one in three immigrants live in one of six metropolitan areas, all of which are located in the West or the South: Dallas-Ft. Worth, Houston, Los Angeles, Miami, Riverside, San Diego, and Washington, D.C. But across all gateway types the foreign-born population is growing faster than the native-born population, and in new emerging gateways, increases in the immigrant population outpace the U.S. average.
The fastest contemporary growth rates belong to the major-emerging gateways (Atlanta, Austin, Charlotte, Las Vegas, Orlando, and Phoenix); together they comprise 8 percent of the total foreign-born population in 2014. Together, these cities grew by 39 percent, three times the U.S. average, with their U.S.-born populations growing by 35 percent, and their immigrant populations by 74 percent.
At the same time, Brookings says, “minor-emerging gateways” experienced the fastest increases in their foreign-born population, including Nashville, Indianapolis, and Cape Coral, FL. Analysts say it is worth noting that while the nine minor-emerging gateways together have doubled their foreign-born populations, the major-emerging immigrant gateways have the fastest growing overall populations across the 2000-2014 period, with natural increase, in-migration of U.S.-born people, and immigrants all playing a role.
“Re-emerging gateways experienced slightly higher total and U.S.-born growth rates on the whole, relative to the total U.S. population, but immigrant growth was stronger, in particular in Baltimore and the Twin Cities,” Brookings analysts observed.
Reproductive Years 
As the large cohort of U.S.-born baby boomers enter retirement age, immigration will become ever more important, analysts agree. Indeed, the difference in the age composition of the immigrant and the native population is evident already.
While 53 percent of the total U.S. population is in the prime working ages (25-64); only 50 percent of the native born population is in this age range versus 72 of the foreign-born population.
Being of working age, however, doesn’t guarantee employment or economic success. The integration of immigrants, especially when it comes to education, occupational training, and English language ability remains critical for supply chain managers to make the most of our immigrant population and their mostly U.S.-born offspring.

Wal-Mart Closures Bring Out the Amazon Sellers

A man loads groceries at the Wal-Mart Neighborhood Market in Dallas.
 
Associated Press
Wal-Mart Stores Inc. closed about 150 U.S. stores this month, due in part to rising competition from online retailers. The largest of those Web rivals, Amazon.com Inc., is reaping benefit thanks to some eager resellers.
Deep discounts at Walmart locations drew shoppers like 22-year-old Keith Yaple, who says he bought about $12,000 in discounted merchandise at one store in Hartland, Mich., so he could resell them for a profit on Amazon.
The practice is known as retail arbitrage. Thousands of sellers scour store shelves with the aim of scoring narrow margins by peddling their purchases online. Many rely on mobile applications that calculate the profits, after shipping and other fees, that they can expect to make per item on Amazon, based on recent online prices.
And for some, it’s a big business with millions of dollars in sales, using their own warehouses and staff to process the goods.
Sam Cohen, owner of e-commerce company DWNY LLC in Ocean, N.J., sent three employees in a 26-foot truck to the nearest closing Walmart, about 160 miles south, in Baltimore. They hauled off $35,000 in merchandise, like Legos and Star Wars pajamas, which he said he expects to sell for as much as $100,000 on Amazon. “It took six hours to scan and pay for all the items,” he said. “It was time well spent.”
Wal-Mart’s store closings presented a special bonanza. Earlier this month, the Bentonville, Ark.-based retailer began slashing prices by 50% in an effort to clear inventory before closing Supercenter and smaller Express stores. It eventually cut prices by 75%.
Mr. Yaple spent about three hours at the Walmart store last week buying anything he thought he could sell for close to their original nondiscounted price on Amazon, including tablet computers and security cameras.
With the help of his mother, brother and a friend—all of whom brought their own cars and pushed eight shopping carts through the store—Mr. Yaple rang up about $12,000 at the register.
He figures the merchandise will bring him as much as $8,000 in profit online.
“It didn’t matter to me what the products were, as long as they sell,” he said. “I cleared them out of pregnancy tests and condoms.”
He said the security cameras, which at half-off cost him $224, could reap him $130 in profit based on current prices on Amazon.
Mr. Yaple, who had a brief stint as a General Dynamics Corp. engineer before making retail arbitrage his primary business, sent nearly all of the goods he bought to Amazon. The company handles warehousing and shipping for a fee and takes a percentage of each sale.
Nathan Slamans, 23, also walked away from the Hartland Walmart Supercenter with a big haul. He fit about $10,000 worth of merchandise—which cost him $5,000—in two shopping carts. “I bought small, high-priced items like cameras so I could fit them in my car,” said Mr. Slamans, noting that ringing up his purchases took about 30 minutes.
Mr. Slamans said he expects to make at least $30 on each of the 20 Sonicare electric toothbrushes he bought at half-price.
Spokesmen for Amazon and Wal-Mart declined to comment.
Amazon has no prohibition on retail arbitrage as long as the goods are otherwise allowed to be sold on its namesake site.
Likewise, resellers’ merchandise doesn’t get any special designation.
Wal-Mart has said the store closings and about 10,000 U.S. job cuts would help contain costs. U.S. retail sales, including e-commerce, grew just 2.1% in 2015, compared with a 3.9% rise the year before, marking the weakest year for growth since 2009, according to Commerce Department data.
Other retailers are retrenching, too. Macy’s Inc. will close 36 stores this year andGap Inc. is in the process of shuttering a quarter of its North American stores.
For its part, Amazon on Thursday reported a 22% gain in sales during the fourth quarter and its largest quarterly profit in its 20-year history. The company highlighted rising sales from third-party sellers, like Mr. Yaple, which accounted for nearly half of the units of merchandise it shipped.
“I hope Wal-Mart closes more stores,” Mr. Yaple said.