Walmart Inc. (WMT, Financial) is a leading American retailer with operations in 24 countries, including the United States, Africa, Canada, Central America, Chile, China, India and Mexico. The company operates through three segments: Walmart U.S., Walmart International and Sam's Club.
With the goal to develop its own cryptocurrency and a collection of non-fungible tokens, Walmart is now planning to become an important player in the metaverse as well. The Betonville, Arkansas-based company claimed in a filing on Dec. 30 that it will provide users virtual currency as well as NFTs. The decision to enter the digital world comes as the number of retailers creating and selling their own NFTs continues to rise, so successfully executing this initiative could go a long way in helping Walmart retain its dominance in the retail industry.
Retailers are rushing to make plans for the metaverse
In December, Walmart filed trademarks indicating its intention to manufacture and sell virtual goods, including electronics, home decor, toys, sporting goods and personal care products. According to another filing with the U.S. Patent and Trademark Office, the retailer also shared its plans to provide users with a digital currency as well as the ability to buy and sell NFTs. In total, seven separate applications have been filed, including one that details possible physical fitness training services and classes in the field of health and nutrition that could take place in augmented reality and virtual reality environments.
The company, like every other retailer, is preparing for the future, noting that it is "constantly examining how emerging technology may affect future shopping experiences." In August, Walmart advertised a job for a cryptocurrency product specialist, indicating its interest in the evolving digital world. Other leading retailers in apparel and footwear companies have started to capitalize on the virtual world as well. Some of these efforts include Nike Inc. (NKE, Financial) selling NFTs and virtual sneakers after acquiring a virtual shoe company, RTFKT, in December. On the other hand, Adidas AG (ADDYY, Financial) made more than $22 million by selling its “Into the Metaverse NFT” collection in December, and on Jan. 13, The Gap Inc. (GPS, Financial) launched a collection of NFTs of different versions of its classic hooded sweater.
The metaverse is becoming a force to reckon with
According to Bloomberg, the market opportunity around the metaverse, a virtual 3-D environment, will be worth $800 billion in 2024. Big tech companies have already pledged to invest billions of dollars in the technology to offer unique experiences for consumers in the coming years. Leading online entertainment and social media companies aren't the only ones interested in the fledgling tech platform, however. E-commerce businesses are also looking for new revenue sources.
A Bloomberg report highlights that most of the market growth will be driven by online game developers and gaming gear that could approach $400 billion in value by 2024, with prospects in live entertainment and social media accounting for the rest. Based on the analysis of Bloomberg, Newzoo, IDC, PwC, Statista and Two Circles, the metaverse will open new doors for all companies to grow.
To leverage the metaverse opportunity, e-commerce companies may start bringing live shopping events into the 3-D world. With the growing popularity of the metaverse in everything from video games to social media, e-commerce companies are likely to move beyond selling NFTs and seize the massive market potential that lies ahead of them.
Challenges ahead for Walmart and other retailers
Despite the high level of interest and demand, getting into the metaverse is difficult. Today's computing, storage and networking infrastructure is insufficient to support the development of this platform, as it would require more computational power. Regardless of the buzz surrounding the metaverse, it should be noted that billions of dollars will have to be invested to become a key player in this virtual world, and these investments will result in a temporary contraction in profit margins.
Retailers will have to invest significantly more than tech companies who have already begun their transition to a virtual world. Customers' buying patterns have radically changed throughout the course of the pandemic, and that trend is expected to continue given how quickly the world has transitioned. As such, the company's decision to join this transition to a virtual world may have come at the right time. However, Walmart will have to carefully move forward with these capital-intensive growth plans as it is already losing market share to Amazon.com Inc. (AMZN, Financial).
Takeaway
Walmart has lost ground to online shopping giants over the last several years, but the ambitious move to embrace the metaverse could potentially turn the tide in its favor by getting the attention of both generation Z and millennials, who are expected to become the largest contributors to the global economy in the coming years. Although this move sounds promising, investors should ideally monitor the costs associated with this strategic drive carefully to determine whether Walmart could unlock value in the future.
