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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.
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.
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.
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.