Can Walmart Catch Amazon?

Can Walmart Take Amazon?
 
Andy Arvidson

The famous African proverb is so true today, especially in the highly competitive online retail space: “Every morning in Africa, a gazelle wakes up. It knows it must outrun the fastest lion or it will be killed. Every morning in Africa, a lion wakes up. It knows it must run faster than the slowest gazelle, or it will starve. It doesn't matter whether you're the lion or a gazelle – when the sun comes up, you'd better be running.”

Can any retailer effectively outrun the Amazon beast? Walmart seems to be the main competitor with a chance at catching Amazon’s supply chain management dominance.

Brian Deagon wrote in Investors Business Daily, “Hostilities sparked when Walmart and Chief Executive Doug McMillon invaded the e-commerce space, forging a $3.3 billion deal to acquire startup Jet.com in August 2016. Jet became the platform for Walmart's online shopping strategy. Then Amazon CEO Jeff Bezos did some encroaching of his own in June 2017 when his company snapped up Whole Foods Market for $13.7 billion, its boldest entry into the brick-and-mortar retail business. From that point on it was clear: The lines separating traditional from online retail are disappearing – and the two are up against new challenges unlike anything they've seen before. It's been a long time since Walmart shared the stage with a retailer of its caliber, while Amazon faces its biggest fight since it started wooing shoppers with cheaper prices and delivery conveniences more than two decades ago.”

There are major online retail turf battles worldwide between Walmart and Amazon. For example, Walmart last month made a $16 billion investment for a 77-percent controlling stake in Flipkart, the leading e-commerce operator in India’s online retail market. India is expected to be the world's second-biggest economy. In contrast, Amazon has only invested $5 billion in the Indian market so far.

Walmart’s U.S. e-commerce sales growth in fourth-quarter 2018 was 23 percent, down from 50% in the third quarter. McMillon says, “The majority of this slowdown was expected as we fully lapped the Jet.com acquisition, as well as created a healthier long-term foundation for holiday”. 

Walmart has also purchased ModCloth, Moosejaw, ShoeBuy, and Bonobos to help accelerate e-commerce growth, while Amazon implemented the Amazon Go convenience stores in the Seattle area with no checkout cashiers, in addition to its Whole Foods purchase.

The new Walmart.com site is a big key to future online retail growth. Marc Lore, president and CEO of Walmart U.S. e-commerce, emphasizes the following with the new website:

  • “An entirely new look and feel. To bring a more human element to the site, we’re featuring relatable photography that showcases real-life moments. Beauty and design extend across all items. Our goal is to make it compelling for customers to shop for whatever they are looking for – whether laundry detergent or a new dining room table. We’re also expanding our color palette and adding fonts to bring more vibrancy and depth to the site.”
  • “Added more local and personalized elements. We’re introducing a new section that showcases top-selling items in a customer’s location. This area of the site will also feature a customer’s local store profile, including availability of services such as Online Grocery, order status, and Easy Reorder, which lets customers easily repurchase the items they buy most frequently in stores and online.” 
  • “Introduction of specialty shopping experiences”

Importantly, Walmart has an incredible advantage over Amazon to help grow its online retail business – its 5,358 stores in the United States alone, according to Statista. The stores are assets that can be leveraged as warehouses and distribution points for fast and efficient online deliveries and are within 10 miles of the entire United States population. 

Meanwhile, Amazon is quickly increasing its brick-and-mortar presence with book stores, Whole Foods, and other acquisitions. The future of e-commerce is a combination of digital and physical store assets. Ninety percent of worldwide retail spending is still in brick-and-mortar stores per eMarketer

Walmart stores are expanding, which is counterintuitive for those doomsayers who are saying retail is dead. The below chart shows store growth from 2012 (4,479) to 2018 (5,358) – impressive given most retailers are going in the opposite direction:

Type

2012

2013

2014

2015

2016

2017

2018

Sam's Club

611

620

632

647

655

660

597

Discount stores

629

561

508

470

442

415

400

Neighborhood

markets

210

286

407

639

667

735

800

Supercenters

3,029

3,158

3,288

3,407

3,465

3,522

3,561

Total

4,479

4,005

4,203

4,516

4,574

4,672

5,358

The bottom line is that Walmart needs to keep running every day and leverage its brick-and-mortar assets to bridge the online e-commerce gap with Amazon.