Walmart Focused on Taking On (Out) Amazon
Compared by total sales, Amazon is not even in Walmart’s class. When it comes to online performance, however, the story is completely different. Now, according to an Advertising Age article, Walmart is becoming even more focused on taking on its e-tailing rival in “what could be the retail battle of the decade.”
This is not the first time that the Amazon vs. Walmart story angle has made headlines. Back in 2009 when Walmart.com launched its own marketplace, it was presented in this space and elsewhere that the company that Sam Walton built was focused on being not only tops in the brick and mortar world, but also online.
Walmart’s bid to become more of a player online is done knowing that Amazon has made a greater push into key categories important to the world’s largest retailer including consumer packaged goods and electronics. Some have also suggested that Amazon may be in a position to supplant Walmart on the “low price” front because it has a lower cost structure to operate its business.
Walmart has pushed initiatives across its business to strengthen its e-commerce operations. Walmart recently opened two small dot-com stores in Southern California, where it had no presence, to try and attract online purchases. The company’s Walmart Labs division has been on a buying spree to acquire technology businesses that it believes will make it a stronger player in the digital space. The company has taken a local approach with its Facebook page, etc.
Discussion Questions
Discussion Questions: Will Walmart become a more dominant force in retailing via digital channels? What is the company doing/not doing that leads you that conclusion?
Walmart has been making steady improvements to its website, leveraging its store base to differentiate. And its purchase of Vudu competes directly with Amazon’s digital offerings. Walmart will be competitive, but Amazon will always be the online leader.
Walmart has many things going for it but they are largely a function of its size and its pricing strategy. Size drives its brick-and-mortar business and pricing drives its customers’ habits, but as Amazon becomes more price competitive, it marginalizes Walmart in the online space.
Amazon is so far ahead of Walmart in the digital realm that it’s really hard to see Walmart becoming dominant, though given its size it should be able to grow albeit with some cannibalization of its existing analog business.
The market always craves alternatives, and this natural market force creates competition that is in the end beneficial to shoppers. Amazon and Walmart both have the resources necessary to compete in e-commerce realm. Amazon leads in e-commerce today, but Walmart has the ability to leverage an “omni-channel” approach to become a much more serious e-commerce contender. In the end, there will be space for both and consumers will be the ultimate beneficiaries.
Walmart will become more dominant. It is doing a lot in the digital space with acquisitions as well as organic expansion and its “labs” group.
Walmart has lacked customer data in its bricks and mortar channel (with no loyalty program), but through digital channels has the potential to gain a much more granular understanding. This won’t be at the scale that allows too much great transferable insights to the offline world but is still very powerful information.
While I don’t see it overtaking Amazon’s lead in the near term, with the pace of change in digital solutions, who knows what the future holds?
If the question is “more dominant” then I say “yes”. They are absolutely investing in multichannel understanding and integration so they can use online and offline to drive sales. If the question is, “Will they be more dominant than Amazon online?” I think the short to midterm answer is “no”. Amazon has huge first mover advantage in the online space and, as the article points out, they have a cost advantage as well.
What Amazon doesn’t have yet, though, is stores. Where it gets interesting is when retailers like Sears (and probably Best Buy, shortly, if they’re not already), Office Depot, etc. realize they have way too much square footage and start leasing it out so an Amazon can set up a pop up store and compete on bricks and clicks without long term leases and a huge real estate commitment. If I were Walmart, I’d be watching that future trend like a hawk. For Walmart right now, stores are both a liability and an advantage. If Amazon can get into bricks with a smaller investment, the head to head competition really heats up. Should be fun to watch.
Walmart is quite poised to grow very quickly and successfully in digital channels. While Amazon has been in the space for much longer, it lacks one thing that Walmart has — scale and a retail space. Digital is one of the fastest growing opportunities for all retailers, putting Amazon at risk. Then again, we’ve seen a wide range of interesting things cropping up in retail as of late. Who’s to say Amazon won’t look into setting up a bricks and mortar footprint of their own?
Walmart is the 8000 pound gorilla, and if they want to invest in the right technology to compete with Amazon, then there is nothing to stop them from doing so. Amazon is very customer friendly to a point where the loyalty is strong for them, BUT if Walmart wants to undercut them severely, in order to win over consumers, it will get ugly quick. Let’s see who wins, and I’m betting Amazon still has some things up their sleeves to stay ahead of the game.
In a world of pop-ups, collection points, m-commerce, f-commerce, and eventually a level playing field on state sales tax, this will be an epic competitive battle. Walmart (and other traditionally store based retailers) are right to have a BIG focus on competing with Amazon.
Walmart could but it won’t because it can’t seem to get out of its own way. Walmart is great at making starts: used car sales, music downloads, video streaming, etc., etc., etc. However, the fact that Walmart has the freedom to kill a project will forever keep it from doing anything that requires a new thought paradigm and a long term investment.
Amazon, is there! Their business model allows them to move into new products and new markets BECAUSE they don’t insist on controlling everything. Walmart’s greatest strength is its distribution system, but that is of little benefit if you intend to deliver services or products direct to the consumer.
Walmart’s DNA is as a logistics company distributing product through 4-wall outlets. Amazon arguably is the company that demonstrated that e-commerce is viable. The chance of Walmart supplanting Amazon is about as likely as Amazon supplanting Walmart.
Retail battle of the decade? How about century?!
Methinks Amazon may have awoken the sleeping giant … but in any case, I do believe that Amazon can compete with Walmart on their own turf. They’re better at process, customer feedback and cross selling (so far anyway), and have a head start in the entire online perception game — first to market.
One thing to watch will be sales overseas, where in fact Walmart is a leap ahead in terms of what global consumers want. That fact alone may boost them ahead in the digital game, but in terms of the more advanced North American customer, Amazon’s got the prize to get and they’re running with it.
It looks to me like a battle between Bing and Google. Amazon was there first and they are going to be very, very hard to replace.
“Compared by total sales, Amazon is not even in Walmart’s class.”
Shouldn’t that be the end of the discussion? Well, whether it should or not, clearly Amazon isn’t…but I find the whole practice of breaking out channels – at least in this context – is artificial. Of course the thinking is that eventually “everything” will be (sold) online, and so whoever leads in online will lead overall, but I think that’s bass-ackward thinking (or at least it’s an unproven assertion). Amazon has grown about $5B a year over the past half dozen years – and still seems to be doing so – so let’s revisit this question in, say, 2031 and see how they stand vs. Walmart.
A lot of good comments here; most important that Walmart is a logistics company and Amazon is a sales company. The billions Walmart has invested in real estate is a liability as well as an asset. This gives Amazon a lot more nimbleness in sharpening their sales skills as they plunge further directly into hardware of their own.
If there is to be a showdown, they will be fighting with very different weapons, and it will be quite some time before either could strike a mortal blow. But I don’t think Walmart can win solely by trying to push back against Amazon. They need to move Amazon selling skills into their stores (and I’m NOT talking technology). Then those stores become more of an impregnable asset.
What I fear for Walmart is that if they don’t learn how to sell, Amazon will gradually move THEIR selling skills into the bricks store and begin eating Walmart’s lunch on Walmart’s turf. A lot more vulnerability here than Amazon’s vulnerability to Walmart. (Sales drive successful businesses, not the ability to deliver.)
I am not so sure that Walmart is after Amazon. That sort of foolishness in the present economic depression can get you killed off. I am much more confident that they are expanding interest in markets that are totally new to them, showing stability and growth. Like the food industry, several markets in the “.COM” industry continue to expand. With legitimate competition entering into these segments, growth could move forward exponentially. If I were in the Amazon executive meetings, I would push to keep an eye on the market opportunities and not so much the competition. Some of their recent discounting of new products may be causing the very same problems they are seeking to eliminate.
Online is not onground. Bricks and mortar are vastly different from clicks and mortar. Each version of retail is a version because it is different. This includes warehouse stores, grocery stores, convenience stores, etc. Wal-Mart is good at what they do, in their own category of retail, but not in everyone else’s category. The sheer size, dominance and presence of a focused online retailer like Amazon comes from their almost 30K employees and massive set of relationships with other online suppliers/retailers. Add to this a common presence online, and you have a vastly different retailer than Wal-Mart could hope to become.
Walmart has had so many failed attempts at owning the digital channel, it is hard to believe that they will all of a sudden be able to compete with Amazon. They have tried to beat Netflix at their own game and failed. They tried the same with digital books, digital music, and digital movie downloads, and have gained very little traction.
Walmart is a great retailer, and they should focus 100% of their efforts in getting as many people in their stores as often as possible, and making certain that they have the right product, at the right price, at the right time for these same consumers.
Amazon is a great digital management company, managing data in the form of customer names, usage, product desires, etc. They will never be the leader in selling soap, toothpaste, clothing, hardware.
If each retailer simply focused on what they do best, and quit worrying about how they steal wallet share from the other, they would both not only survive, but prosper. Everyone has to stop focusing 100% on getting bigger; just keep getting better. The success will come organically.
Walmart’s online business model features only products they carry. Amazon.com sources nearly everything from everywhere. Their “inventory” is many times larger than Walmart’s. Walmart will never be able to match that.
Just how big does a company need to be? Does Walmart really need to eliminate ALL competition? This makes no sense at all! Why not concentrate on giving back to the communities it serves rather than trying cause any more people to lose their jobs by destroying an alternative way of shopping. Unfortunately, one of the bad things China is learning from the US is the false impression that bigger is better. I see the fallacy growing here, everywhere.