I made a statement recently that I believe Amazon is the next generation of Walmart, and I was asked if I see any downside with that.
I don’t really see a lot of downside here, but that doesn’t mean there won’t be any. Time will tell how this shakes out, but I don’t think it’s an “either-or” scenario with these two retailers. What we’re seeing is a symptom of the huge change that’s happening right now in the industry.
As I see it, Amazon is driving change in retail, and Walmart is being dragged along. But when I say dragged, I do not necessarily mean “behind,” which they most certainly are, WAY behind, digitally, at the new store shelf, the doorstep, and with private label, but they definitely lead the way in-store.
Walmart isn’t going down without a fight, as evidenced by their e-commerce sales in the fourth quarter last year. Their online sales were up 43% during that quarter, and according to a February 19th article on CNBC, the retail giant’s overall e-commerce sales growth for 2018 was 40%. Rather than building new stores, they heavily invested in their website and added more products to compete with Amazon in the digital space, and their in-store sales were still up 4.2% last year, with the average shopper ticket growing 3.3%. For the first quarter of 2019, their shares were up 7%. The question is… will shoppers continue to do the majority of their shopping in-store for much longer?
Both retailers are investing in building their own in-house brands and attracting more third-party sellers—and adding to the types of products they offer in e-commerce. Here lately, Walmart is acquiring some digitally native brands, like Bonobos and Bare Necessities (not sure about how these fit, but they are desperate to attract a more affluent customer), and plans to do much more of that. Marc Lore, the head of their e-commerce division in the U.S., says Walmart will continue to “buy and build,” in this manner (IMHO because he has growth numbers to reach and acquisition is the only way to do it), and may own up to 40 digitally native brands some day.
That kind of foresight (or desperation depending upon your view) and competition is a good thing in the long term, as stores continue to be downsized and eliminated. There’s no doubt that Walmart is using its size and base of thousands of stores as a leg up to go head-to-head against Amazon. But it’s important for all retailers to understand that retail isn’t a store anymore, it is a method of engagement—where you are, when you are, and what you want.
The way I see it, Amazon is still very much ahead of the game with private-label branding—something Walmart hasn’t been able to do. Amazon’s audience is huge, and they will pick up an Amazon branded product in a heartbeat, but the audience for Walmart branded products is much more limited. Why? Because Amazon stands for quality and has the aura of an upscale brand (Walmart, by their own branding, is simply about low prices, EDLP)… and has already been out in front of the pack, creating relationships with their customers, finding out what they want and delivering it. They have proven themselves. Their strength is that they have been first-movers from day one and continue to lead the way. They’re 24/7, everything for everyone, and they’re moving into services and beyond. Will Walmart catch up? I’ve got my doubts, but let’s stay tuned and find out! AND wait until Amazon’s next traditional retail acquisition… my best is that Whole Foods was “training wheels” and just the beginning.
SIMPLICITY is the new EDLP! Make it easy for them… and they will buy it from you again and again and again. Frictionless fulfillment is the retail of the future.
This first appeared on Ted Rubin.
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