Chapter 1: How did Walmart evolve from a traditional retailer to a tech powerhouse?
Welcome back to The Rundown for another weekend deep dive. Today, we are talking about Walmart. Walmart has been one of the best performing retail stocks in the market, and the company recently crossed the $1 trillion market cap for the first time ever.
So in today's episode, we'll break down how Walmart went from a dinosaur brick and mortar retailer to an absolute digital powerhouse and a legit competitor to Amazon. We'll dive into the numbers behind the transformation and some of the challenges they face moving forward, including a new CEO. We got a great one for you today. Let's dive in.
Now to understand where Walmart is today, you have to go back to 2014. And honestly, things were not looking great for them. At the time, Amazon was absolutely torching the retail industry. Online shopping was exploding and Walmart, which had spent decades dominating the giant physical stores, suddenly looked like a dinosaur.
They had very little e-commerce presence at the time and their same store sales were declining. That's when Walmart's board made a bet on a guy named Doug McMillan. He took over as CEO in February of 2014. Now, McMillan is a Walmart lifer. He started working at Walmart as a teenager in the 1980s, unloading trucks at an Arkansas warehouse.
And he literally worked his way up from the warehouse floor to becoming the CEO of the company. And when he took over, he focused on modernizing Walmart. He doubled down on e-commerce by acquiring a company called Jet.com for $3 billion in 2016. A lot of people at the time thought that was an overpay, and while Jet.com didn't really work out, it brought e-commerce talent into Walmart.
Jet.com founder Mark Lurie ran Walmart's e-commerce business and turned it into a fast-growing business that it is today. But beyond the Jet.com acquisition, CEO Doug McMillan also invested billions of dollars in making Walmart's supply chain automated and tech-driven.
He also launched Walmart Plus, which was their answer to Amazon Prime, which is estimated to have over 25 million subscribers today. but I think the best decision that he made was leveraging Walmart's physical stores. A fun fact, 90% of Americans live within 10 miles of a Walmart.
So Doug McMillan spent billions of dollars to transform those 5,000 plus stores in the US into hyper-efficient distribution hubs to fulfill online orders. And by doing that, that allowed Walmart to deliver orders within hours, not days, including groceries. Walmart's footprint became a competitive advantage compared to Amazon, which lacked physical
I'll be honest with you guys, I subscribe to Walmart Plus and I get my groceries delivered from them weekly. They're not paying me to say this, but if someone from Walmart is listening, my DMs are open. So yeah, all that investment that Walmart made over the last decade in their e-commerce business and technology and improving their supply chain, it's all starting to pay off.
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Chapter 2: What strategies did Walmart's CEO implement to boost e-commerce?
So let's take a closer look at their business and why that might be happening. The company just reported their earnings and in 2025, revenue was up 4.7% to $713 billion. E-commerce was the bright spot. It grew by 23% in Q4 globally and 27% here in the US. In fact, it was the eighth consecutive quarter of e-commerce growth above 20%. And here's the detail that really jumped out to me.
35% of store fulfilled orders were delivered in under three hours. In fact, the US customers using the fast delivery option, which is deliveries under three hours or less, grew by more than 60% in a year. I mean, that's the competitive advantage that Walmart has of being within 10 miles of 90% of the US population.
And the other benefit from offering fast deliveries is that Walmart has attracted wealthier shoppers who prioritize convenience. But I think what's really caught investors' attention is Walmart's margin expansion.
You know, selling groceries isn't really a high margin business, but Walmart's operating profits have been growing faster than revenue, which means that Walmart is getting more profitable. And that's thanks to three main reasons. First is advertising. Walmart's ad revenue was up 46% to $6.4 billion in 2025.
Now that might be surprising to a lot of people, but Walmart is sort of becoming an ad company. As more and more people shop on Walmart's website and app, that allows Walmart to serve more ads. Every time someone looks up a product on Walmart's app or website, the first two or three results are sponsored.
Brands pay Walmart for that top placement in the search results, and that is a high margin business. I'm talking like 70% margins. The growth in the ad business is contributing more to Walmart's operating profits. Walmart also recently bought the smart TV maker.
So that will let them run ads directly into people's living rooms and I guess collect all the data that you're watching on TV, which is very creepy, but that's what pretty much every company does at this point. Now, the second reason for Walmart's improved margins is automation and inventory efficiency. Walmart is now using AI to better manage inventory.
inventory only increased 2.6% in 2025, which was half the rate of their sales growth. That means that Walmart is getting better at managing inventory, which helps them save on storage costs. They're also automating their supply chains and their warehouses to save on labor costs. So that efficiency is resulting in better margins for Walmart.
And finally, the third driver of higher margins is membership revenue. Now, on top of Walmart Plus, Walmart also owns Sam's Club, which some people say is better than Costco. Now, personally, I'm a Costco guy. I haven't been to Sam's Club in so long, but a lot of people I know prefer Sam's over Costco. If you guys have any thoughts on that, let me know in the comments.
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Chapter 3: How is Walmart leveraging its physical stores for competitive advantage?
Thank you guys so much for listening, watching, and commenting. Shout out to Mike and Connor for all the work behind the scenes. And we'll see you guys back here tomorrow.