Braintrust Query: Amazon/Walmart.com – An Interesting Battle to Watch
Commentary by Bill Bittner, President,
An interesting battle
began last week between the titans of brick and mortar and online retailing.
Walmart announced it will be offering ten highly anticipated hardback books
on its website for $10. After Amazon responded to match the $10 offer, Walmart.com
raised the stakes by lowering their price to $9.
Walmart.com CEO Raul
Vazquez told cnnmoney.com, the
retailer was “committed to providing our online customers with the lowest prices
available.” Observers are left to wonder if this is an effort by Wal-Mart Stores
to merely revamp the book channel or if there is a larger objective to build
awareness of their online presence.
Wal-Mart is often
cited as the most efficient brick and mortar operator. They are well known
for their effective investment in IT applications to support their retail operations.
Their effective implementation of warehouse automation and even their experiments
in RFID all demonstrate an emphasis on efficient distribution. They have enjoyed
the advantage of being able to offer their customers the “immediate gratification”
that having a physical presence enables. But Wal-Mart has also heard the footsteps
as online retailers are becoming a larger force in the retail channel. This
announcement is their way of telling everyone they are not going away.
Consumers are becoming more comfortable with online purchases and delivery.
Broadband internet connections have become more common, providing quick response
times with full video and audio support. This enables retailers to develop
interactive experiences on their website or imbed reference to their online
stores in popular virtual worlds such as Facebook, YouTube, etc. Creating
a retail presence in the virtual world where more customers are spending
their time is becoming critical.
has been the de facto leader in online retail. But although we tend to think
of them as a technology company, Amazon has also developed an efficient fulfillment
network with distribution centers strategically located all over the world.
Their announcement of “same day delivery” blunts
some of the advantage of retail outlets.
So this sets up an
interesting microcosm of the current retail environment as we watch these
two companies who dominated their respective channels begin chipping away
at one another. Who will win?
note: Target has upped the ante and announced it will offer the same
titles as Walmart.com on its website for a pre-sale price of $8.99.]
Questions: Is there a motive behind Walmart’s online book promotion beyond
just books? Can Amazon effectively counter the natural brick and mortar
advantage for impulse shoppers? Is Amazon’s first-mover advantage in books
too much for Wal-Mart, Target and others that may join the fray to overcome?
commentary] While they still only represented 3.6 percent of total sales
in the second quarter of 2009, the rate of increase in e-commerce sales is
steadily rising. Their dollar volume continues to increase at the same time
total sales volume is declining. This compounds the effect of customer moves
to the virtual world.
believe the Walmart move is much more than simply an attempt to sell more
hardbacks. Book buyers are Amazon’s traditional customer. By targeting their
online store at Amazon’s core customer, Walmart has made it clear they are
going after them directly. This move will at least get those customers to
visit the site and see what else Walmart has to offer.
far as the bigger picture, I don’t know that we’ll ever see enough detail
in the sales numbers to be able to discern the final impact. Brick and mortar
operations are tough to operate. I would not blame some retailers if they
started considering cutting back on physical locations and moved emphasis
to their online offerings. Especially in highly concentrated areas, retailers
can offer customers the ease of online shopping with the convenience of next
(or same) day delivery.
- Quarterly Retail E-Commerce Sales 2nd
Quarter 2009 – U.S. Census Bureau
- Wal-Mart vs. Amazon: Fight is on for book
sales – cnnmoney.com
to Offer Select Hardcover Books at $8 – Target.com