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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.
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.
Walmart can pay it's workers less then Amazon and pass part of the saving after the ceo's cut.
Not only that but usually you could select same day pick up at the store your in, wait around until you got the 'ready' email, walk to the back of the store and pick up the one you were looking at.
I did this for a carpet cleaner walmart had, 100$ less online, but they refused to sell it to me at their online price. I had to order it from my phone, select the store I was at, then wander around for 45min until I got the 'order ready' email, then walk to the back of the store and pick up the same unit I had just been looking at.
Ill never understand why B&M stores always treat their online segment as a whole other business rather than integrate properly
They keep forgetting ONE BIG reason people order from Amazon.com.
You don't have to pay Sales Tax on the items.
Yes, I know you are supposed to pay use taxes in most states, but seriously, who does that?
In my area, local plus state sales tax is in the upper 9.x% range....when I buy a large ticket item online, I save a substantial amount of $$. I'd have to pay that sales tax if I bought the same item on Walmart.com or picked it up in the store.
I know that someday this will come to an end, but in the meantime, I'd have to guess a LARGE number of people order from Amazon and others to avoid high sales tax in states that charge it....
Amazon collects sales tax in most states now:
Items sold by Amazon.com LLC, or its subsidiaries, and shipped to destinations in the following states are subject to tax:
Arizona Indiana Minnesota Ohio West Virginia
California Kansas Nevada Pennsylvania Wisconsin
Connecticut Kentucky New Jersey Tennessee
Florida Maryland New York Texas
Georgia Massachusetts North Carolina Virginia
Illinois Michigan North Dakota Washington
My use of Amazon didn't go down after they started collecting sales tax -- I use Amazon for the convenience. It's still possible to avoid the sales tax collection by buying from an out of state Amazon Marketplace seller, but I've had so many bad experiences with them (obviously used products sold as new, broken product (in a box that someone wrote "Bad" on, product with missing pieces, etc) that unless at product is fulfilled by Amazon I rarely buy from a marketplace seller.
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.
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
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.
You have to be biased against walmart to feel that way. It's just like any other supermarket. Maybe whole foods makes you feel better because they give you the impression that what you're eating there is healthier (spoiler: It's not. I've worked for a major food distributor and we sold them the same stuff we sold walmart when they ordered the same category of items.) The only difference is whole foods refuses to carry certain foods citing health concerns (though there's no actual scientific basis behind their ban list) and they charge you about four times as much. But if paying four times as much makes people feel better, then to each his own I say.
Anyways, two major reasons I don't buy from walmart most of the time:
- Amazon usually has better prices and the selection is much bigger.
- Walmart rather annoyingly doesn't honor their own website's prices in store. If you want their online price, you have to buy it online and then wait a few hours to pick it up in store.
That said, I could see myself springing for Walmart instead of Amazon if they did something like this:
- Greatly expand product selection
- Day after or second day after delivery of your item to the local store
- No "prime" style subscription required (I only use mine for the free shipping and nothing else, I have never really liked prime video or any of the other services.)
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.
I have a hard time taking Walmart seriously when it comes to instant gratification. If I want anything fast I'll go to just about any other store first, because those other stores are more likely to actually have cashiers ready to work. Whenever I go to Walmart half my time in the store is spent waiting in line to check out.
I have been paying sales tax on Amazon for years and years. Further it wasnt Amazon dodging taxes our lawmakers SPECIFICALLY exempted internet commerce so that it could grow.
Good-bye
One things that is interesting is that the buying and marketplaces are different between Amazon and Walmart. Just about anyone can sell on Amazon. Prime sellers obviously have some more hoops to jump through. Walmart has to have their buyers pick products, negotiate prices hard, etc. They have more work to do (I think) to sell you something. That has made some sellers move their products to Amazon. The other thing is that sellers don't have to run a whole eCommerce site anymore. Amazon makes it super easy to sell and for buyers to buy.
Anecdotally, I have a family of six. We have a "Super" Walmart which is the only major store in my town of 6,000 people the surrounding towns. They have groceries, the normal stuff they carry, an auto repair shop, a doctor, optometrist, two fast food places, and some other things and are open 24/7. We used to shop there all the time. If I wanted to go to Target or Best Buy or whatever I'd have to drive about 20 to 30 minutes or do it during my lunch hour (which is super inconvenient).
Now we shop almost exclusively at Amazon and we buy our groceries from Peapod. Selection and convenience are the biggest thing for me. I've moved to 90 percent or more of my purchases to Amazon (we have a family of six). Walmart either doesn't have what I need (they tend to carry lower end things here anyway) or I just don't feel like going there. Waiting two days for Amazon is fine.
BTW, Peapod is freaking awesome too because everything is just there. It saves your last order and you can just reorder, adjust quantifies or whatever, it's usually about the same price as Walmart's grocery store. Produce is great and they even deliver those 40 lb. water softener salt bags that Walmart has all the way in the back of the store even though everyone here needs them.
Chance favors the prepared mind.
Perfect is the enemy of good.
Walmart has to follow the same health guidelines that every other grocery store has to follow. If Walmart is doing it differently, then it's only a matter of time before everyone else is doing it the same.
No they don't, they really really don't. This following of guidelines has to be done by associates. They can and do gut their labor supply until they're staffed entirely by the most hopeless dead-end cases, and then pressure those people until they're scrambling to keep up, much like Amazon does in fact.
You can't DO produce like that. It bruises, damages and spoils and you get in situations where because everything's a wreck the customers feel no obligation to be decent w.r.t the other customers and it all becomes a complete shitshow.
Health guidelines go out the window. The other part of your statement is sadly (somewhat) true: yes, Walmart puts market pressure on everybody else to be just as much of a shitshow. Either everybody declines to match, or turns to weird things like Aldi where you're sort of picking your way around palettes of cardboard boxes full of counterfeit products that are hopefully shelf-stable for years. Very American, for all that it's a German import.
It only goes so far before people start bucking the trend by finding favorite stores that haven't declined so much, and playing favorites even in the teeth of Walmart price cuts. I realize it's heresy, but price isn't everything.