The battle of the retail giants

The battle of the retail giants

Amazon and Walmart are fighting over the future of retail.

As Amazon has grown into the retail phenomenon of the twenty-first century, shipping everything from books and DVDs to daily groceries, it’s not only the so-called Mom ‘N’ Pop stores that have struggled to compete, but also mighty retail giants such as Walmart.

An Investor’s Business Daily article earlier this year described the battle between the two powerhouses as nothing less than a “knock-down, drag-out clash of the new retail titans, with no end in sight.”

Yet it is Amazon – the one-stop shop will deliver practically anything to your front door – which has gained the upper hand.

Proof comes in a Reuters report published this week which reveals via internal documents and interviews with Walmart employees why a recent home delivery pilot program launched by the company flopped.

Walmart has 4,700 stores across the US online and in recent years has invested billions of dollars in its ecommerce business. Until recently, this meant shoppers ordering online and later driving to Walmart to collect the purchases.

Yet last year, Walmart began to experiment with an Amazon-style “last-mile” delivery service at six of its stores, precisely to keep up with the online retailer. Nevertheless, the Reuters report reveals the pilot program struggled amid a lack of incentives for employees who were expected to work overtime to make deliveries on top of their sales floor roles.

The initiative was abandoned in January, although a revamp recently began to be piloted at just one Walmart store in Woodstock, Georgia.

Amazon Branches Out

Meanwhile, as Walmart feels its way into the online shopping realm, Amazon is building a reputation in retailing at the physical store level. After its successful experiment with a cashier-free grocery store in Seattle, dubbed “Amazon Go,” the company has opened further branches in Chicago and New York and is reportedly planning more.

Furthermore, Amazon’s recently announced merger with Whole Foods has put Walmart on notice that it intends to take an even bigger piece of its rival’s retail pie. Walmart gets more than half of its sales from the $700 billion U.S. grocery sector, an area in which Amazon has only just begun to compete.

And the battle is not only taking place in the grocery sector space. Amazon is currently undergoing a major expansion into apparel, with several of its own private labels. In February, it announced the launch of two premium private-label denim brands. That same month, Walmart trumpeted the launch of four new private-label clothing brands of its own.

Walmart has one key advantage in the fight, however – it’s much larger than Amazon by revenue. Walmart’s 2017 sales surpassed $500 billion for the first time, making it almost three times bigger than Amazon. That size enables Walmart to put a much bigger squeeze on suppliers than Amazon in online shopping.

In many ways, the transformation of the two companies is still in its early stages. Analysts believe the battle for the future of retailing will play out over many years. Amazon needs to figure out how best to operate and grow beyond the 468 Whole Foods stores it acquired, just as Walmart’s McMillon needs to expand online operations while handling 11,500 stores across 28 countries. Neither challenge will be easy.

At the same time, as Investor’s Business Daily‘s Brian Deagon describes:

“Outside this battleground, the prospects are getting dimmer, not only for existing retailers trying to compete with these two behemoths, but for those who were hoping to get their foot in the door.”

2018-08-14T15:56:28+00:00

About the Author:

Paul Imison
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