Walmart and Amazon trade shots
Last week, Amazon.com announced the launch of Prime Day, a sales event for Prime members offering even more deals than Black Friday. As widely expected, Walmart has answered back with a sales event of its own and, listening to the retailer, you might think it’s doing so as an act of retail mercy.
"We’ve heard some retailers are charging $100 to get access to a sale. But the idea of asking customers to pay extra in order to save money just doesn’t add up for us," wrote Fernando Madeira, president and CEO of Walmart.com, in a company blog.
"We’re kicking off some awesome deals this week that will be available for everybody with no hidden costs or admission fees, and they won’t be available for just one day. Our customers will see thousands of great deals on Rollback beginning this week along with some special atomic deals (more on that in the days to come)," he added.
Mr. Madeira also announced Walmart.com was rolling back its minimum from $50 to $35 for customers to qualify for free shipping.
While Walmart was chiding Amazon for running a sales event just for its Prime members, it has been testing a shipping membership program of its own. The test, codenamed Tahoe, is said to offer free three-day shipping to members who pay an annual fee of $50. It is not known if Walmart’s program will come with the kind of additional perks, such as streaming video and free e-books, offered by Amazon.
Amazon didn’t let Walmart’s chastisement go unanswered. According to a CNET report, Amazon said "some retailers" have been known to charge higher prices in their stores than online.
"The idea of charging your in-store customers more than your online customers doesn’t add up for us, but it’s a good reminder that you’re usually better off shopping online," said Greg Greeley, vice president of Amazon Prime, in a statement.
Walmart is not the only large chain running a big sale this month. Target’s "Black Friday in July" sale continues through Monday. Best Buy’s July Black Friday event is scheduled for July 24 and 25.
While Christmas and Black Friday in July events have been going on for years, the current crop of sales seems more competitively intense with the addition of Amazon’s Prime Day and Walmart’s response. Is it possible 2015 may represent the beginning of a change in consumer spending with mid-July taking on greater significance for the top and bottom lines of retailers?
Discussion Questions
Which retailer do you think will come out ahead of the competition this month sparked by Amazon’s Prime Day? Do you see the increased focus on sales in July leading to a change in consumer shopping behavior in the years ahead?
Poll
BrainTrust
Dr. Stephen Needel
Managing Partner, Advanced Simulations
Cathy Hotka
Principal, Cathy Hotka & Associates
Amazon, its client base is more likely to respond to a “flash sale.” Whether it succeeds will have a lot to do with how “sale” the pricing really is. Black Friday works because there really are some deals in there. Whether Amazon can create the deals without massive vendor support remains to be seen. For an EDLP retailer like Walmart having an online sale is an interesting development.
Neither will come out ahead — it’s the Christmas price wars moved to July.
What a sideshow.
Remember that Amazon probably wouldn’t exist today if established retailers hadn’t waited to set up their own online commerce sites, and then took another few years to integrate them with their other back office systems. (Some still haven’t.)
The real lesson for retailers here is to go full-bore on modernization. It’s the only way to hang on to market share.
One person’s opinion: Amazon is the king of online sales. Almost enough said. Give Walmart credit for not standing by watching from the sideline. But when the dust clears the king will still be the king.
I think many global online retailers have been inspired by the success of China’s Singles Day, a contrived e-commerce promotional holiday that is now the single largest global e-commerce promotion.
Both Amazon and Walmart seem to be awakening to the power of tentpole events to drive awareness, traffic and short-term sales with their respective mid-July promotions.
Both retailers will likely see a spike in demand in the run-up to the critical Back-to-School season. And consumers will definitely win.
The key, though, is whether either retailer is simply shifting demand ahead (and sacrificing margin), or whether the promotional event will yield sustainable advantage.
On that front, Amazon has the most upside. Amazon is launching or expanding several key value-add programs like Prime Now, Prime Pantry, AmazonFresh and more. If Prime Day drives new memberships, the annuity value of those memberships could be profound.
Amazon has gotten a lot of attention for Prime Day and I think Amazon will prevail during this event, on July 15 anyway. Otherwise I think different shoppers are visiting Amazon and Walmart for different reasons so I don’t see this rivalry as the most significant one moving forward. I’m also not sold on July being the next big shopping season unless these sales get a lot more attention and offer unique opportunities for consumers.
This isn’t just about an online Black Friday event in July, it is the start of a war for consumer relationships that are profitable beyond price.
Amazon will come out ahead in this first salvo. They have a well-established Prime program that drives their most profitable consumer segment. Even if Amazon doesn’t sell a ton of volume, they still win by attracting new Prime members for the long term.
A telling sign of the war for deep consumer online relationships is Walmart’s developing “Tahoe” program with a $50 membership fee. Despite their PR, they are late to the party.
The major significance of this unfolding online war is that online can quickly create events at any time of the year. Merchandising stores for such an event takes a very long lead time, with the risk of a lot of leftover inventory if it doesn’t sell through.
It is significant to note that only one retailer had the foresight, infrastructure and the ability to initiate this event, and it appears to be very significant given how hard the others are scrambling to catch up.
I’m surprised that Walmart jumped in on this. It must mean that Amazon is in the driver’s seat and making Walmart a bit nervous.
Although there’s overlap, ultimately, they serve different markets so each will likely get some traction in their respective spaces and it will, in terms of a battle, likely be a draw.
Also, I don’t believe that either sale will have a major positive impact on the companies’ year-end bottom lines.
I think we may be missing the point of this. I don’t think Amazon is competing with Walmart et al., as much as they are testing the limits of Prime.
I love a good fight and this is fun to watch, but I think Amazon is playing a different game than the others.
Behaviorally, the only way this will take hold is if it is consistent and reliable over years to come. Black Friday used to be known as the day after Thanksgiving, which means it is the same every year and all retailers are geared up for it.
This July stuff captures the attention of each retailer’s segments and bargain shoppers with little to no loyalty. That is why Amazon is limiting it to Prime members. They are high quality, reliable spenders.
As the economic outlook continues to spiral downward throughout the world, the fight for market share is more necessary than ever before. Both of these companies are aware of the need to stay ahead of the market(s) collapse as well as the need to move into new markets of all types.
Walmart and Amazon have much less in common than this discussion would lead us to believe. What is common ground for both is the economic indicators for the fourth quarter of the 2015 fiscal year. I am not talking about the improved outlooks as seen through the eyes of the financial media networks, but the real ones as in sales to date against forecast and of course net contribution to corporate. Very few of us see these results before the insertion of financial abracadabra factors, but with labor and payroll cutbacks along with real production cuts in North America, Europe and in China, the truth is always near.
Walmart and Amazon will continue to maximize opportunity for their respective sales plans for this fiscal year’s results. There is simply no time to ponder the whereabouts of the competition in an economic climate that is shrinking for more than a decade.
Amazon still wins the online battle, and Walmart wants to be king of the universe, so let the battle begin. Two giants slugging it out only means one thing: consumers win.
The economy is also dictating this, as the GDP is about zero, and sales are sluggish after a major holiday. Have fun finding some bargains, as there will be plenty.
I put my money on Amazon. They are still ahead of Walmart.com. Amazon is fast, efficient and customer centric. Despite the deals promised by Walmart, its online site is not as easy to navigate, nor is it as customer friendly as Amazon’s.
Yes, this is another chapter in transparent pricing and deals throughout the year, not just at the holidays.
An interesting race to keep up with, no doubt. I agree that Walmart is late on this one. Sure, Tahoe is half the price of Amazon’s, but price is just one aspect of it. Amazon has locked down some pretty appealing add-ons for Prime that make it worth the price.
This could signal a faster race to the bottom this holiday season, but I think Amazon is on to something in terms of cultivating loyalty with Prime. If Amazon and Walmart both have the same prices on items and will both deliver them quickly and for free, there’s still going to be something that makes shoppers choose one retailer over the other. Developing and improving that “something” has to be the focus for Amazon, Walmart, and any other retailer that wants to keep up.
I guessing Amazon will do better. While Walmart is a 500 lb. gorilla, in the online arena so is Amazon, and Amazon has a lengthy history in managing online retailing. Moreover, it has a success record in launching new initiatives, but that success record has been earned by a willingness to take risks on new ways to reaching consumers. Stuff hasn’t worked for Amazon over the years, but they have learned a lot in the process. Walmart has no such history and is using an odd “we’re going after Amazon” approach instead of strictly focusing on values for their customers.
Sale for Prime members is a bit of a scheme to get more membership. Walmart will probably come out on top this summer. Amazon is still a fraction of the size of Walmart. There will be a time when Walmart goes on a massive offensive online and then we will have a real fight.
The convenience of Walmart’s 11k + locations is just too much of a competitive advantage.
On a side note, it would be nice to see some online retailers partnering with companies like Netflix to cross pollinate membership.
Xmas in July may in ages hence be compared with other invented commercial holidays, like Hallmark’s reputed invention of Mother’s Day. Once Amazon opened the Prime Day floodgate, other large retailers evidently felt compelled to dive in. Consumer wallets are finite, after all.
Retailers have good reason to desire a second peak holiday shopping season timed for the opposite side of the retail calendar cycle. It may expand total consumption slightly, and it certainly could have an impact on retailers’ annual cash flow statements—shifting the accountants’ “Black Friday” back closer to Halloween.
So who wins and loses? Amazon wants more Prime members—and I think it will get them. Walmart, Best Buy and Target may find an antidote to summer doldrums before the back-to-school sales kick in. If Xmas in July sticks, product marketers may find it an opportune time for product introductions.
Advertising media seem to be enjoying a nice bump from all the promotions.
If consumers do spend more, it may come at the expense of summer travel budgets. I’ll be curious to see if that hypothesis holds.
Ahh! The first price bot war is about to commence. Should be interesting digital theater.
Who is going to come out ahead on this one? Amazon.
As much as I am enjoying this heavyweight fight for all of the benefits and savings it is bringing to consumers, Amazon wins this round. They were the first to the punch with the promotion, and they can lose money on all of their sales and still come out significantly ahead through the immediate revenue, up-front cash collection and ultimately lifetime value of the added Prime signups.
Especially telling, my gut reaction when I heard about Prime Day was “Hmm, maybe it’s time that I finally sign up for that Prime membership.” My gut reaction when I saw Walmart’s promise of rollbacks? “Why, when they are known as the standard-bearer of EDLP, were they not already proactively passing those savings on to shoppers?”
Effectively, Amazon comes away looking like they are delivering a winning proposition for shoppers while Walmart, by countering Amazon with the promise of more rollbacks, inadvertently undermined trust in their brand as the lowest-price retailer that always passes on savings to you.
As Chuck said, Amazon is playing a different game than Walmart and other traditional retailers. It is a treacherous new game as retailers’ historically winning moves now actually risk worsening their position.
As for shifts in consumer shopping behavior, that remains to be seen. Even with hot door buster deals, retailers have historically been unable to lure consumers away from their summer plans long enough to spend any significant amount of money—certainly nothing close to rivalling spend on Black Friday or Cyber Monday, anyway. But, kudos to Amazon on creating a major event in July, and aligning their big summer sale with the 15th of the month—payday for many shoppers. I see Christmas in July as a good side benefit, but not the primary purpose of Amazon’s initiative. Either way, well done.
This week’s price war is a race to the bottom, with razor-thin or non-existent margins for both Amazon and Walmart. For Amazon they’re trying to build a base of Prime members, so for them this could be a loss-leader.