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WHY THE WALMART WHY WALMART E-COMMERCE STRATEGY WON’T BEAT AMAZON 1
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Can Walmart Walmart e‐commerce strategy strategy beat Amazon?
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The competitor to be feared is one who never bothers about you at all, but goes on making his own business better all the time. ‐Henry Ford
Beat Amazon? All of a sudden, Walmart Walmart has gotten serious about this E‐commerce competition. 1 Why? It’s all about the future futu re and and the curr cu rrent ent trends. trends . And the Walmart e‐commerce strategy.
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According According to Nielsen Nielsen,, e‐commerce will gain more ground than any other othe r segment o f the retail industry by 2017, 2017, with a compound annual growth rate of 11% each year 2 . Supercenters come in second, with their growth growth rate projected at only o nly about half h alf that of web shopping. When you consider sales for consumer packaged packaged goods online — food, groceries, everyday everyday items — are more like high double digits, almost 20%, you can see Walmart’s Walmart’s concern. Both chains ch ains dominate their th eir areas areas of expertise. Once just a bookseller, Amazon is now the biggest o nline store sto re in the world with $61 billion in 2012 revenue. Walmart is the world’s largest largest retailer of any kind kin d with $469 $469 billion 2012 2012 revenues (estimated $7‐8 coming from from E‐commerce E‐commerce in 2012). Related: Indust Industry ry Disruptive Change Change … Who Will Be Disrupted Next? Walmar Walmartt is doing all it can to catch up with Amazon Amazon online. But lots lots of obstacles exist. exist. We don’t don ’t think Walmart Walmart can catch Amazon for these 6 reasons:
Amazon’s singular focus Amazon Amazon is an e‐commerce company in everything they do. They have developed all all their expertise in full support of e‐comme rce. In fact fact they now n ow do e‐commerce for many many other oth er businesses. business es. They are not hamstrung by an enormous brick and and mortar business like Walmart. Walmart. No internal int ernal competition like what Walmar Walmartt faces day‐in day‐out. day‐out. Walmart Walmart doesn’t does n’t discuss this subject su bject and probably probably would deny it exists. But it does. No que stion there. And it yields a gigantic gigantic silent advantage advantage for Amazon.
Logistics and delivery
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Logistics is what made Walmart great. But delivery is a different matter. Walmart is dabbling in same‐day delivery and and even going a step further than Amazon by using stores sto res as fulfillment fulfillment centers cente rs and if expanded, expanded, could turn 4,000 4,000 stores into bases for same day delivery. Two‐thirds Two‐thirds of the t he U.S. population lives within 5 miles of a Walmart, and trucks crisscrossing the country arrive daily to replenish the stores, s tores, which can greatly greatly reduce reduce shipping costs. costs . However, However, the process comes with serious se rious limitations, particularl particularlyy since s ince it diverts workers’ attention away away from from ensuring e nsuring sto res are are clean and properly stocked. But it is still st ill a possible big advantage advantage to Walmart Walmart if they could think th ink like one business busines s instead of two. They are also attempting attemptin g to crowdsource crowdsource package package drop‐ d rop‐ off among among customers. custo mers. But Amazon has non‐perishable n on‐perishable products like diapers that its infrastructure allows allows shoppe rs to set s et up u p regularly regularly scheduled deliveries, a service service popula popu larr on Diapers.com. A fantastic fantastic feature. And Amazon is alrea already dy a step ahead with its Amazon Fresh same‐day delivery, currently available in the Seattle area but soon s oon headed for California. California. Amazon Amazon is building out this infrastructure infrastructure for perishables. Groceries Groceries will will be the battleground very soon coming to the th e forefront. This will further eat into solid Walmart business. But what is Walmart doing? They are creating a vast new logistics system th at includes building new war warehou ehouses ses for Web orders. Hedging Hedging their the ir bets so to speak. s peak. More More illustration illustration of the internal competition in our mind. As Walmart’s Walmart’s online orders have grown, grown, it has h as turned to to makeshift spaces carved carved out of store‐serving distribution centers and third‐party third‐party warehouse warehouse operators to help h elp handle the load. The extra layer layer added to its costs. Walmart’s online shipping can cost $5 to $7 per parcel, while Amazon averages $3 to $4 per parcel, parcel, analysts say—a big difference difference considering some so me of o f Walmart’s Walmart’s popular purchases are low‐cost items like $10 packs of underwear.
Agile Innovation Amazon Amazon has h as existed in the ecommerce eco mmerce technology techno logy world world since their the ir inception inception.. They think like a technology techno logy company and agile innovators. They are are not n ot afraid afraid to t ry new things and they the y can get things done don e quickly, thanks to the th e culture their the ir CEO CEO Bezos has instilled. Related: Ama Amazon’s zon’s Innovation In novation Culture: What is Jeff Bezos Up to Now? No w? Walmar Walmartt may not be a start‐up, but it doe s try to think t hink like one with its Walmart Walmart Labs Labs division. Those Tho se groups is developing Pangaea, a global technology platform with scan and go apps apps that let shoppers s hoppers buy in store via a smartphone, and on line opera ope rations tions in growing markets markets outside the U.S. such as Brazil Brazil and China. China. They’re doing more new things, but t hey are slowed slowed down by their th eir legacy business and its mindset.
They are as as trying out lockers, one of Amazon’s hallmar hallmarks, ks, allowing allowing shoppers shoppe rs to o rder items online on line and pick them up in stores — crucial crucial for the Walmart Walmart demographic, a quarter of whom whom reportedly do not use debit or o r credit credit cards or even have a bank account account.. But why would an an on‐line on ‐line shoppe r want want to de al with with the th e congestion congestio n of a visit to a Walmar Walmartt mega store? sto re? Not us.
Customer set differences Walmart demographics, a quarter of whom reportedly do not use u se debit de bit or credit cards cards or even have a bank account 2 , represent a big difference difference with t heir key e‐ commerce competitor. competit or. While While we have not found any statistics on Amazon customer cust omer set, we speculate a much larger larger representation of higher h igher end incomes income s among their th eir shoppers. shoppe rs. Big advantag advantage e to Amazon we believe, both in consumer consum er disposable income, but also in ability to operate and shop on‐line. And take advantage advantage of frequen frequentt new technology techno logy features. features.
Existing in-store strategies Walmart has an enormous and growing network of brick and mortar outlets — 4,000 4,000 in the U.S. and and counting. cou nting. More internationally. internationally. With those thos e stores sto res goes an equally enormous product offering. A blessing but an equal curse. curse. They are a long long ways on being able to put all the products product s on‐line where they can be easily found. At some stage these thes e stores and product line may be an advantage advantage for Walmart. Walmart. But those t hose are are technology t echnology constrained goals that are, for now, out of reach. And that is not even considering con sidering how Walmar Walmartt might solve so lve its internal competition problems. Can Can you imagine imagine the t he Wal‐ Mart Mart cash cow making compromises in terms t erms of revenue and profit profit to help their th eir e‐commerce business? Not us. us .
Technology lead Like Amazon, Walmart has a massive product offering. This isn’t a new problem for either of them, but as the race race to t o fulfill orders guarantees guarantees quicker turnaround turnaround times and more convenience after placing placing the th e order, orde r, Walmart Walmart must control con trol everything it can can before the order is placed placed to ensure en sure it’s actually actually placed placed through them. t hem. In this th is case, that means making sure customers cust omers can find what they’re looking for, quickly and easily. Or, in the case that customers custom ers don’t know exactly what what that is, helping them figure it out with a fairly high degree of accuracy. Walmart must transform itself into an invisible personal shopper to help customers navigate its vast inventory.
What exactly would that take? A lot. But Walmart’s two most crucial crucial priorities priorities will be helping online customers custom ers navigate navigate its extensive extens ive product list e asily and and quickly, and streamlining online and offline operations to create create a turnkey overa ove rall ll experience. To act as an invisible personal pe rsonal shopper, Walmart Walmart must master what what they do with this powerful combination of content conten t and data—and data—and when they do it. The goal is to use it in real‐time, real‐time, as customers custom ers are are browsing their online on line store.
Walmar Walmartt is trying to improve links between its store st ore inventory, invento ry, website, and mobile phone apps so th at more customers custom ers can order online and pick up the ir purchases purchases at stores, which half of Web custo mers do already. already. Walmar Walmartt is trying Web‐based shopping shop ping tactics, like its Pay With Cash program program for Walmart Walmart custome cu stomers rs who don’t do n’t have credit cards. The new program allows them to reserve products online and pay cash cash at their th eir nearest nearest store.
Key takeaways At the end e nd of the t he day, Walmar Walmart’s t’s rise to online dominance really just revolves around turning tu rning an otherwise complicated shopping experience into one that feels quaint qu aint and easy. It can accomplish accomplish this th is by setting settin g up a strong strong behind‐the‐scenes behind‐th e‐scenes infrastructure infrastructure that puts the customer experience at the forefront. And isn’t t hat what their new stra st rategy tegy is all all about—giving the customer cus tomer what they want want where and when they want it? Unfortunately it is much easier said than done. There are many great e‐commerce campaigns we can learn learn from. Please post your comment s below, offering questions quest ions or o r your own great great examples for e‐commerce strategies. Need some som e help in finding ways ways to grow your customers? Such as creative ideas to help the differentiation with potential pote ntial customers? custome rs? Or perhaps finding ways to work work with with other businesses? Call Call today fo r a FREE consultation consultation or a FREE quote. Learn about about some options to scope your job. Call Mike at 607‐725‐8240.
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Test. Learn. Improve. Repeat. Are you yo u devoting enough en ough energy ene rgy continually continually improving your business learning? Do you have a lesson about making your learning better you can share with this community? Have any questions or comments to add in the section below? Mike Schoultz Schoultz is the founde r of Digital Spark Marketing, Marketing, a digital digital marketing and custome r service serv ice agency. With 40 years of business experience, he blogs on topics that relate relate to improving the performance of your business. Find Find them on G+ G+,, Twitter , and LinkedIn LinkedIn..
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Minimalist Guide to be a Business Where Minimalist Wh ere People Want to Work 7 Surprising Surprising Things to Know Kno w About About the t he Amazon Business Busin ess Model Secrets to Chipotle’s Culture and Employee Employee Engagement
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Walmart e‐commerce strategy
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6 Responses to Why the Walmart ECommerce Strategy Won’t Beat Amazon ola says:
I really really enjoyed this articles. And I pretty much agree agree with everything e verything you said. To be honest , I kind kind of hope that walmar walmartt goes out o ut of business. bus iness.
mike says:
Thanks for your comments. comment s. Walmart Walmart is not my favorite favorite retailer either.
bond says:
Walmart Walmart is do ing some som e great innovations and everyone eve ryone will come to know kno w in next 2‐3 2‐3 years years whats there th ere in the bag
mike says:
Bond … I am sure they are and time will tell. But can they catch Amazon? Certainly Certainly not in 2‐3 years in my humble opinion. Mike
techguy says:
Walmart will never beat Amazon due to two reasons: SERVICE and CULTURE. CULTURE. How can you replicate great great service online if you can’t even do it in the ir stores? stores? You don’t shop Walmart Walmart for the custo mer experience.
mike says:
Point well taken. taken. Thank you for sharing.
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