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Walmart Plays Catch-Up With Amazon
HughPickens.com writes: According to James B. Stewart in the NY Times, for the past 16 years Walmart has often acted as though it hoped Amazon would just go away. When Walmart announced last week that it was significantly increasing its investment in e-commerce, it tacitly acknowledged that it had fallen far behind Amazon in the race for online customers. Now, the magnitude of the task it faces has grown exponentially as e-commerce growth continues to surge globally. "Walmart.com has been severely mismanaged," says Burt P. Flickinger III. "Walmart would go a few years and invest strategically and significantly in e-commerce, then other years it wouldn't.Meanwhile, Amazon is making moves in e-commerce that's put Walmart so far behind that it might not be able to catch up for 10 more years, if ever."
In 1999, Amazon was a fledgling company with annual revenue of $1.6 billion; Walmart's was about $138 billion. By last year, Amazon's revenue was about 54 times what it was in 1999, nearly $89 billion, almost all of it from online sales. Walmart's was about three times what it was 15 years before, almost $486 billion, and only a small fraction of that — 2.5 percent, or $12.2 billion — came from Walmart.com. Walmart's superefficient distribution system — a function of its enormous volume and geographic reach — was long the secret to Walmart's immense profitability. Ravi Jariwala, a Walmart spokesman, says that Walmart is building vast new fulfillment centers and is rapidly enhancing its delivery capabilities to take advantage of its extensive store network to provide convenient in-store pickup and adds that 70 percent of the American population lives within five miles of a Walmart store. "This is where e-commerce is headed," says Jariwala, which is to a hybrid online/in-store model. "Customers want the accessibility and immediacy of a physical store," along with the benefits of online shopping.
In 1999, Amazon was a fledgling company with annual revenue of $1.6 billion; Walmart's was about $138 billion. By last year, Amazon's revenue was about 54 times what it was in 1999, nearly $89 billion, almost all of it from online sales. Walmart's was about three times what it was 15 years before, almost $486 billion, and only a small fraction of that — 2.5 percent, or $12.2 billion — came from Walmart.com. Walmart's superefficient distribution system — a function of its enormous volume and geographic reach — was long the secret to Walmart's immense profitability. Ravi Jariwala, a Walmart spokesman, says that Walmart is building vast new fulfillment centers and is rapidly enhancing its delivery capabilities to take advantage of its extensive store network to provide convenient in-store pickup and adds that 70 percent of the American population lives within five miles of a Walmart store. "This is where e-commerce is headed," says Jariwala, which is to a hybrid online/in-store model. "Customers want the accessibility and immediacy of a physical store," along with the benefits of online shopping.
Glad to see it. 5 stars!
As the summary suggests, Walmart does have an advantage in its distribution network and storefront locations. At a greatly-reduced cost, Walmart could very quickly compete with Amazon for Same-Day delivery service if that proves to be lucrative.
Additionally, in the not-so-distant future, when autonomous vehicles become the norm, consumers could order online and send their own car to the Walmart distribution center to be loaded up with the groceries, etc. to reduce the cost of deliver.
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Walmart believes "Customers want the accessibility and immediacy of a physical store." That is why their online business is doomed to fail. Yes, sometimes you just want it right now, but then you'll drive to Walmart or whatever local store will have it and buy it. But often you want the real online experience with unlimited selections and no hassle with trips. Why would I buy something online and then drive to pick it up?
Yes, Walmart has a huge and efficient distribution system, but can they really leverage that for online sales? When stocking stores, they ship large quantities to each store. For online sales, it's small quantities of a much larger variety. You have to support the customer who is the only one in the area buying that item just as well as you do the customer who buys the most popular item. I doubt their distribution system can adapt to that model.
Walmart can try, but in order to beat Amazon at this point, they don't just have to match them, they have to be better. I don't think they even understand what better looks like, let alone have any way of getting there.
His surname isn't his fault, but putting Roman numerals after it is.
If you're not a king or queen, that's a strong indicator you have more ego than brains.
Let's face the facts: walmart uses node.js. It's webscale. What does amazon use? Java or c++ or something like that. Not webscale! Amazon should probably just close their doors and give the money back to their investors. It is literally impossible to beat node.js. I mean, to be a java programmer, you have to go to college and shit. To be a rockstar ninja javascript programmer, all you need is a 6-week code bootcamp.
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So, the other day I was searching for a BluRay to buy (Yeah, I know, I'm old skool like that). $19.96. Not a bad deal. I go to a B&M Walmart. $28.96. WTF?
I look more carefully at their site on my phone. $19.96 online, $28.96 in store. I could order it online to be shipped to the store for pickup for the $19.96 price, but it's on the shelf in front of me right now. Why the pricing games?
I definitely agree, Walmart needs to fix their online sales system.
It really started when Prime was introduced and amazon video... at that point people didn't even realize that walmart also had free shipping for orders over $35 or that they also have streaming video... but the thing is .. although Amazon does have a great network of delivery.. that delivery is the USPS .. I live within 10 miles of a Amazon Warehouse and I have never received a package from them.. everything comes from Kentucky .. or California even and I am on the east coast...
If Walmart hired a couple drivers at each of their stores to deliver fresh food and normal consumables just like Papa Johns does across the country .. then Walmart would hammer every other distributor. .. just like big rubber maid bins but insulated so they could deliver food to homes.. that is the next challenge for an aging population.
Walmart can pay it's workers less then Amazon and pass part of the saving after the ceo's cut.
So far my spouses and mine experience with the online pickup section of their stores is that at night the Walmart employees really hope that no one will show up and just abandon that little room of the store. The first thing that needs to happen is to have fast service at the online pickup room %100 of the time.
It's got to be hard to catch up to somebody who is so far behind you. You'd have to sell all the way to infinity, go back to negative infinity and then catch up to the $12 billion in sales that Amazon does.
There is a lot of "me, me, me, now, now, now" in American culture. Wal-mart will always have a place as long as people can't stand to wait two days over instant gratification.
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suck it1!!!!!
Like I'm going to do business with a company that is even more obnoxious and evil than Amazon.
70 percent of Americans live within 5 miles of a Walmart? I find that highly unlikely, at least in California. I don't know anyone that lives within 5 miles of one. Granted there are Walmarts around, but not one every 10 miles. Where my parents live ( in a highly populated area ) there isn't even one within 50 miles.
The Walmart app tells you not only which store has it in stock, but which aisle it's on.
Btw they dropped the hyphen from their name about 15 years ago.
I needed some plastic table risers to raise a table a little. Tried Walmart.com. Website was useless regarding whether or not a local store had what I needed. I went to local WalMart. Forty-five minutes of combing the store on my own, then asking three different employees, two of which happened to be managers, they eventually showed me where the risers would be.... if they had them. Apparently, they were all out. Wasted an hour+ of my time.
Went to Amazon. Typed 'Table Riser". Clicked the one I wanted, Add to Cart, Checkout. 1 minute of my time. Showed up next day, free shipping.
Don't know about other Slashdote'ers, but I buy significantly and continually more in my local Walmart than in Amazon. I can go months without buying a penny in Amazon while I go to my local Super Walmart in NoVA once or more per week.
Not that it's a great community beacon of fairness.... But I doubt Walmart has to worry about Amazon ever... Unless Amazon start to sell retail with big-box stores. Then, we'll be able to compare...
I invite people to navigate to the walmart.com site and take a look. What are they trying to do there? Is it that the walmart.com team is expected to be financially self supported? I would not expect a company that is as large and successful as Walmart to be insisting on something that surely can't be bringing in much money while undercutting their future.
Amazon hasn't ever made a significant profit. What point am I trying to make? I have no idea but it's an important one!
"A person is smart. People are dumb, panicky dangerous animals and you know it." - K
They maybe should set their sites on trying to match Home Depot. They are doing the model that Walmart purports to be going after. The difference being that when I do a buy and pickup at store; it actually gets picked and is waiting for me at Home Depot, but not so at Walmart. The online and in store stock db matches on Home Depot, but not at Walmart.
I guess it comes down to; Walmart's business plan could work and be successful; however to be able to execute they have to have store managers that are competent, and that seems to be against their policy.
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Walmart was built on quality, name brand merchandise at low prices. At some point the MBAs took over and decided it was better to direct source merchandise from offshore manufacturers and slap their own label on it; they also beat down the name brand suppliers to shrink packages and cut corners to lower the price. They are now seeing what happens when you chase short term profits and drive off long term customers.
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I've heard about Walmart's predictive just-in-time ordering-and-distribution system being one of Wal-Mart's sources of strength for decades.
It doesn't really exist.
Here's a simple experiment: Walk into your local Wal-Mart and find a few empty shelf locations (places that are tagged, where something clearly should be stocked, but isn't.) The existence of so many empty spots pokes a hole in this myth. An efficient, predictive system should be anticipating demand and keeping those locations stocked.
Now, maybe there's some profit maximization algorithm that's keeping those items in the warehouse rather than on the shelf. Maybe those items are bulky, or low-margin, and room on the trucks is reserved to maximize profitability. But, over time, those holes should get filled. So, keep an eye on those items for a few weeks, and see if they get filled in. Do they?
Hmm. OK, so maybe low-margin, low-demand items aren't worth restocking quickly. Let's look at high-margin, high-demand items like, say, groceries. Go to any small-town Super Walmart and check out the grocery aisles on Monday morning. When I lived in rural Pennsylvania, we'd go shopping on Saturday morning, because if you waited until Sunday afternoon, they were out of everything and you'd have to wait until mid-week for the shelves to get restocked. Clearly there is plenty of demand not being met. It happens every freaking week with the same items, it's trivially predictable. Bring in a refer full of frozen foods and dairy, and a truck of dry goods on Saturday night, make more money and make your customers hate Walmart a little less.
Finally, Walmart.com. If Amazon can get me anything in two days, most of which comes from a warehouse less than 50 miles away, why can't Walmart (which should be having daily deliveries full of just-in-time orders) get in-stock items in-store in less than two weeks?
It's really interesting that this article just came out. I just got back from Walmart where I was attempting to pickup my son's birthday gift. It took me over an hour of waiting to get it. The online system never sent me an email that it was ready for pick up, but instead said that it had already been picked up. It even gave me the option to return it. I went into the store to figure out what was happening. It hadn't been picked up, but it took them over an hour to find the item.
What more disappointing is that this wasn't an isolated incidence. Over half of the time that I have items shipped to the store, I have a similar experience. Last time it took them two hours to find my package, and that was after I had received an email asking me to go pick it up!
As I wait, I see other customers having to go through the same thing.
No, they are not whole people. Not whole people.
If they were whole people they wouldn't rape.
That's not how I'd interpret those numbers. Amazon is is burning cash (have yet to post a profit) and after 15 years they've managed to increase their online sales to $89 billion. Walmart isn't even trying and they've managed to reach $12.2 billion in online sales - 1/7th Amazon's. Furthermore, the growth of Walmart's retail sales, $486 - $138 - $12.2 = $336 billion, is nearly 4x Amazon's growth in those 15 years.
I love Amazon and I'm a long-time Prime member. But until this story I had no idea growth in retail sales was far outstripping growth in online sales. Looking up some graphs, I see now that the stories I'd been reading about how online sales were "catching up" to retail sales were based on percentage growth, not actual dollar growth. And that as a flat dollar amount, retail sales have in fact been growing far more than online sales.
Some of Amazon's strategic moves that had been head-scratchers now make sense. Like how they agreed to charge sales tax so they could establish warehouses and depots in most states. Or the crazy idea of delivery by drone. They're trying to crack into that retail market with same-day delivery.
Rape is the way of their kind.
I'm not sure having to pick up your delivery in person at a Walmart is quite the benefit Walmart thinks it is. The old joke about Target being the store for people who are willing to pay more to avoid being around Walmart customers exists for a reason.
At what point were they even close?
I'm a good cook. I'm a fantastic eater. - Steven Brust
That was going to be their model. Thing is, Amazon has been building up same day service for the last 5 years. They're working on Autonomous vehicles too. Meanwhile Walmart has grocery delivery, even for 'free' at my company, but they charge a premium for all the items you buy and you don't get to pick your produce so the value isn't really there.
It's looking more and more like online will kill brick and mortar. What I'm wondering is what's going to happen to all those property owners when it does. They guys Walmart & co lease their buildings from are billionaires after all. They make their living renting out the space. All that property is set to become worthless in 20 years. 30 tops. I can't see those guys going quietly into the good night. I'm actually a bit scared. They've got crazy money and power, and their backs will be at the wall. I could see some pretty awful things coming out of that, sort of like how the health insurance biz spends a few billion dollars every time the specter of single payer comes up and we end up with a compromise that is somehow worse...
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Walmart needs to catch-up with Amazon's search, filters, and reviews.
Customers want the accessibility and immediacy of a physical store
Is Mr. Jariwala referring to the immediacy of getting my lazy ass dressed, into the car, and to a Walmart store just to enjoy the "immediacy" of finding out they're out of stock on the item I need and have no idea when they're getting more? This attitude is why Walmart's same store sales are often in decline.
The main feature of Walmart (and Target) is that you can get stuff today and sometimes without much schlepping. Wandering around the store takes time, but you can purchase in-stock items online and pick it up from customer service later in the day. If you pass a Walmart or Target on your daily commute, you can just pop in and pick up your order quickly -- not much schlepping required. Granted, that doesn't work if the store is out of your way.
They're getting out of the "slave/subsistence wages" business model. Walmart is in the process of upping their minimum wage to $10/hr (and taking a large financial hit along the way http://www.bloomberg.com/news/... ). They've already raised it to $9/hr. Moreover, it's not like Amazon warehouse workers get treated well. In fact, some say it's worse that Walmart: http://www.salon.com/2014/02/2...
(That said, I still get a lot more stuff from Amazon than Walmart.)
You have to be biased against walmart to feel that way. It's just like any other supermarket.
I have no particular beef against Walmart but I don't like shopping in their stores for groceries. If it comes in a box they can handle it ok but fresh produce or meats? I wouldn't touch most of what they sell with a barge pole. We have a Walmart a few miles south of my house and their selection of fresh produce is pathetic to say the least and usually not very good quality either. Their meat counter is similarly useless. If I want to get Doritos and soft drinks then it's not bad but "just like any other supermarket"? Only of you are comparing it to the bad ones.
Maybe whole foods makes you feel better
Nope. I rarely shop there and while they have MUCH better produce and meat than Walmart (not exactly a high bar to clear), I don't really care if stuff is organic and the mark up at Whole Foods is pretty outrageous in a lot of cases.
- Amazon usually has better prices and the selection is much bigger.
My experience is that the prices are usually comparable but you are right that the selection at Amazon is WAY bigger. I don't really have much interest in Walmart.com because they don't provide anything I cannot get at Amazon except in rare cases.
I can see the future when Amazon buys FedEx or UPS (or an unknown). Sure it is all out-sourced to them - but they have all created huge distribution networks.
Walmart can become like those Delivery Only Pizza places...or dare I say.. Service Merchandise.
This is where Walmart can beat Amazon - they already have the local warehouse and future distribution center. Amazon is still building theirs.
For those who don't recall who/what Service Merchandise was - Catalog shopping. A mashup of online stores of today. You physically browsed the inventory/catalog and placed your order to pickup In-store. You didn't buy anything off the shelf - instead you placed your order at a computer and it would roll out at the front of the store for pickup, https://en.wikipedia.org/wiki/...
We got the confession, boys, move in!
Not that anyone does, but legally you're required to remit unpaid sales tax in your taxes.
Don't forget, Amazon's logistics chain was built by Wal-Mart veterans.
In fact, Wal-Mart sued Amazon at one point because of that.
AFAIK, the only logistics person that didn't seem to have a logistics background is Tim Cook...although he was in charge of fulfillment for IBM's PC division at some point. I'm not sure anything in his background would have led anyone to believe that he could create a manufacturing machine like Apple's.
If you're not searching for a specific brand name of something, you will often get 87 nearly identical products (often with wildly varying ratings, chock full o'astroturfed reviews) for junk made in China.
Half the time I search on Amazon I feel like I'm just getting an iframe with the results from Alibaba.
Walmart - The Land of Cheap Plastic Crap, has NEVER been known for quality, only discounted brand name 'stuff', inexpensive nonunion part-time underpaid retail labor... but superior logistics!
There are case studies done about companies like Rubbermaid that expanded production on the basis of contracts with Walmart, only to find that the once they were beholden to this behemoth for a substantial portion or their revenue, Walmart demanded price reductions. Good business or unscrupulous abuse? That depends on what set of stockholders of constituents the story is presented to.
Walmart's distribution and logistics increased its rate of inventory turnover, and the efficiency allows for greater price competition. That's the biggest part of their success. It's not rocket science, and it sure hasn't resulted in anything good for the vast majority of its unskilled labor force.
"adds that 70 percent of the American population lives within five miles of a Walmart store"
I live 5 minutes from a pizza place too, but I pay for delivery. This guy is just wrong, I don't want to drive to the Walmart and I certainly don't want to walk in there. Ship me my stuff.
Ain't happening. Top talent is jumping ship at Walmart eComm and day to day operations are being handled by entry level cheap talent, H1-B visas, and offshore outsourcing. Read the glassdoor reviews. The site is getting worse, and this is just another calculated explanation for cutting "Associates" hours at brick & mortar locations.
Anyone that has used the search function, on Walmart's website, can tell you that it is terrible. I have to know exactly what I want before I go there. Most good online websites are set up so that you can easily browse through similar items, but walmart.com gives me about 3 items close to what I am looking for and then throws in pages of random items that have some strange search word in common with the items I want to look at.
The stores are filthy, under stocked and the wait in line is twice as long (though Target is catching up in that last one :( ).
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Will always exist. They'll just change a bit, but won't be completely replaced by e-commerce. People want a place to go sometimes. It gets kinda boring to browse the internet for what you need. Sometimes you want to hold the product in your hand. That's where Walmart comes in.
They have a LOT of work to do. Have you ever tried ordering more than a handful of items from Walmart? Their online cart will throw an error if one item in your cart is out of stock when you try to checkout.
You then have to play the hokey pokey and pull items out of your cart randomly until you find the item that's causing the problem.
These are the kinds of problems e-commerce platforms solved years ago, it's shameful that they persist to this day with walmart.com
Yeah and Marky Mark tried to tell us his name was Mark Wallburg instead. Neither are fooling anyone and they are both just horrible.
Customers may like the immediacy of a physical store, but I guarantee you they will like the even greater immediacy of Amazon's Drone Delivery Service even more. By the time Walmart manages to build a meaningful online presence (if they ever manage that at all) Amazon will obsolete them again with things like drones and whatever comes next, who knows, 3D printers, replicators, whatever.
Seriously, Walmart is a dead man walking. It will be gone within 20 years.
The fact that if Walmart actually had good management it could kill Amazon in retail online. It has all the strength in supplier power and warehousing to do it. But as my experience buying from Walmart.com and picking up is anything but an adventure I think this will hold Walmart back. I have had two very poor experiences picking up a Walmart online purchase. In fact I have yet to see anyone manning the service desk for Walmart.com pick ups. You always have to push a button or somehow select a request for service. Many times its several minutes and many associates later who actually help me. Its why for a few dollars more I tend to buy from Amazon and just count on the free shipping. At some point it will dawn on Walmart that a person who buys online and picks up in their local store does not deserve less service then a local shopper. But just as Walmart installs multiple cashier stations with less then a third manned at any one time. It stands to reason that Walmart is losing to Amazon just on bad management.
Really, Walmart is 100x bigger than Amazon and actually has large scale reach (not distance).
Why all the Amazon articles of this week (hiring 100K temps, stock price, walmart comparsions, etc...)?
Likely because they always need a gimmick to stir up attention in gearing up for the holiday season. 2012-Kindle Fire/phone & cyber Monday, 2013-drones. 2014-floor bots, black Friday and echo (which really got steam in the last quarter). A company like Walmart doesn't need to (they will get shoppers for the holiday season).
And every year Wall St reports missed earnings/loss and business news ALWAYS talks about Amazon vs Walmart.... every year.
We get it. And Amazon will continue to stay in the red.
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I bought something from walmart.com once.
It was defective.
I returned it to the store, which carried the same item, desiring an exchange.
"You gotsta do that thru the website" I was told by the dark-skinned employee, who was also the manager on duty.
Never again.
Hi. Have been involved in retail from cart-boy as a kid to C-suite as an adult.
A possible reason why Brick & Mortar refuses to instantly match the online price is because *each* physical store is treated as an individual business from the perspective of the c-suite. A 'discount sale' to Online Division is a *loss* to that individual store.
In Anytown USA the Walmart Store on Main Street shows a unique Profit & Loss from the Walmart store across town on Elm Avenue.
Each store's individual performance is ranked for not only for profits but for shrinkage, losses, insurance costs, cleanliness, inspection violations, customer accolades, number-of-returns, fraud, community relations -- everything that a business would be responsible for.
Performance by store aggregates to performance by district and then performance by region. All of which *COMPETE*
Regional Managers are actually pretty high-up and are gunning for c-suite or related upper-level positions.
Store management and District Management thru Regional Managers (call them the Brick & Mortar Clique) will resist efforts that will lower their performance. Being compelled to discount to the online sale price lowers performance. There is no actual 'computer processing time' as all of us geeks know in granting the online price locally.
Now it is TRUE that Walmart corporate level could simply credit each store for 'losses' on online discounts. And that's what they should get to doing. (I was at Citicorp in the 90's when my regional manger realized this was a good idea in banking to not screw the individual branches to grow online division)
However we are forgetting here that Walmart, according to this post, still grosses almost 500 billion dollars a year! That's enough money that they don't really have to change anything for a long time. Even if someone TRIED to run a business THAT BIG into the ground it would take minimally years and possibly even a decade or two.
By the way, pretty VIRTUALLY ALL large businesses behave this internally-tribal way. That means Mark your Chase Banker on Main Street is frakkin pissed when you move your account to the Orvis the Chase Bank on Oak Street. Mark also loses bonuses as an employee because his bonus is set by his manager at Main Street.
All the Chase District Manager sees is that Main Street Chase lost a $100K deposit and Oak Street Chase *gained* 100K deposit. Guess which manager has a higher probability of bonus that quarter? Doesn't matter it is within the same 'big corporate family'
As the Arabs are said to say, "I against my brother, my brother and I against my family, my family against our cousins and our clan
against the world!"
So realized that your Chase Banker at Main may want to behead the Chase Banker at Oak if you 'move' your account despite there being no actual physical change of anything. This is why bankers ask you to 'move' your account to their branch despite not really being able to justify it with service changes.
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