Walmart Vs Amazon

When people think of retail giants, Walmart is usually one of the first retailers that come to mind. The firm has dominated the retail space for years, with its low prices and one-stop-shop shopping experience. The company was founded in Arkansas and started out as a local discount shop and over time the core value of offering everyday low prices is what grew the company and retains its success to this day (Collins, 2018). As a result, Walmart has been (and still is) the largest retailer in America, with $374 billion in sales for the year of 2017 (Tyler, 2018). According to the Washington Post, in 2016 Walmart had 4500 stores in the United States. Walmart is not just domestic, the chain also has a global presence. One of the key attributes to Walmart's success in retail has been its low prices and one-stop-shop feature. The store carries a plethora of products ranging from electronics, clothing, household goods, furniture, outdoor goods, cosmetics, art/office supplies, groceries, and more. In fact, groceries are leading the charge in Walmart's current market share, making it the largest grocery chain in the country and holding 23% of the market share in the grocery industry (Hsu, 2018). While its success has become well-known, not all good things last forever. Walmart must readjust its strategy to carry its success into the digital age. With the rising popularity of e-commerce and rapid delivery services, they will have to find a way to keep up with the competition in order to hold their spot at the top of the list for retailers in America. Before going into the current issues that Walmart is facing, it is important to first look at the industry as a whole. The retail industry is vast and covers many sub-categories. There are many retail giants that are front-and-center, including Walmart, Target, Amazon, Nordstrom, Kroger, Best Buy, Costco, Walgreens, and so on. Retail giants tend to place themselves in one of two strategic categories- cost leadership or differentiation. For example, Walmart embraces a cost-leadership strategy by providing rather generic/common brands, however, they set themselves apart by offering discounted prices that give them a competitive edge over competitors in the industry. On the other hand, Target (another popular retail giant) has directed itself as a differentiated superstore. While their prices would not be considered outrageous they are definitely higher than that of Walmart, but the differentiated products that Target offers consumers is what compensates for the higher costs. Because of the nature of retail giants, suppliers are generally not in a position to be picky or hold immense control over retail buyers. If a superstore retailer such as Walmart were to discontinue their selling of a certain brand, that alone could be detrimental to the brand's lifetime and success depending on how popular the brand is. This puts retailers in a better position to make strategic purchasing decisions for the brands and products that they carry. Retailers do not have to be stuck with one supplier for a product that may be more expensive- there is a vast supply of products that they can pick and choose from to place in their stores. In the retail industry, there are millions of consumers, if not more. Therefore, consumers do not impose a large threat towards retailers. The vast amount of consumers available mean that the power they hold to control retailers is rather low, and the consumers are not in a strong position to skew the direction of retail companies. Consumers generally do not have the option to create or supply their own products that retail stores supply, and as a result they are dependent on stores to provide them with the products that they need. When it comes to Walmart in particular, consumers do not have a vast variety of substitutes to choose from that follow the same cost-leadership strategy while providing the massive amount of products that Walmart does. While there are other retailers (such as Target) who sell many different products, one thing that sets Walmart apart is the cost leadership strategy that is embedded in their brand image. Consumers can decide to go with another retailer, however, they may not necessarily have the same variety of products as well as the low costs that they could find at a Walmart. Once consumers get acclimated to purchasing the same products at a Walmart, it would be an inconvenience for them to switch to a different retailer that does not carry those exact products. For example, if a loyal Walmart consumer were to switch to Target as their superstore retailer, they would most likely face the challenge of shopping for different products/brands as well as paying a higher price for those substitutes. As a result, consumers can sometimes face switching costs when they shop with a different retailer. For existing retailers, there is a threat that new competitors can enter the industry and pose certain challenges. For up-and-coming retailers, entry barriers such as capital requirements are not outlandishly high. There certainly are costs that are required to start a retail company, however, a new retailer can start out small by renting a smaller store and having lower overhead costs. Lower overhead costs for new retailers can allow them to sell their products for a lower price which gives them a competitive advantage over already established retailers in the market. Larger retailers do not always have this advantage of price cutting because generally they tend to have higher overhead costs (Greenspan, 2018). While new competition poses a threat, so does current competition. The threat of current competitors in the industry is something to be aware of. There are many competitors that exist in retail, and the large retail giants tend to be equally sized. Some products in retail are perishable, such as the grocery department at Walmart which can allow current competitors to have a superior advantage in the market. Another factor to consider is that many products in retail have substitutes that are readily available from opposing firms, therefore, customers do have other options. Retailers are always competing with each other to be the best in the market, and this leads us to the strategic situation that Walmart is facing currently- how to compete with Amazon. It is no secret that Amazon is dominating the retail industry, specifically within the e-commerce sector. Amazon had the advantage of launching an e-commerce platform much earlier than most retailers, giving them a head start for success. As Amazon has generated increasing popularity, consumers have shifted their preferences towards online shopping experiences. One of the competitive edges of Amazon, compared to other e-commerce platforms, is that they allow third-party sellers to have a place on their marketplace, making the total amount of products that they sell on their website close to 350 million (Boyle, 2017). Apart from selling apparel, everyday products, and more, Amazon also purchased Whole Foods as an attempt to penetrate the grocery market. If Walmart wants to ensure not only its success, but its survival into the digital age they must find a way to compete with Amazon. Walmart did launch their e-commerce website in 2000, however, it failed to catch up to the level of Amazon. Walmart.com had an algorithm that price matched the lowest price for their items that were available from other vendors online, however, executives feared that if the online price was lower than the in-store price then consumers would be less inclined to go to the physical store (which was the main profit-generator at the time for Walmart). Walmart was also reluctant to allow third-party vendors to sell products on their platform until 2015, which is one of the key factors that contribute to Amazon's massive product selection and success. It appears that Walmart's executives underestimated the value of e-commerce to consumers, resulting in them being left behind in the age of Amazon that we are currently in today (Boyle, 2017). So what is Walmart's strategy to give Amazon a run for its money? The answer is Jet.com. Jet.com is an e-commerce platform created by Marc Lore, a veteran e-commerce entrepreneur. The platform sells a variety products, similar to Amazon. Jet.com also offers shipping promotions such as free shipping for orders above $35, and encourages consumers to order more than one product at a time to cut down on shipping expenses. Walmart acquired Lore's company and put him in charge of all e-commerce related to the company, such as Jet.com and Walmart.com. Lore's strategy is to focus Walmart's e-commerce on increasingly popular items for online shopping, such as groceries, everyday items, and apparel, while simultaneously offering shipping promotions to customers including lower shipping costs on multiple items and in-store pickup for online orders. The strategic move to purchase Jet.com as a tactic to compete against Amazon is a smart move on Walmart's end. The company is aware of the fast-moving trend towards e-commerce, and working with someone like Lore who is a seasoned e-commerce entrepreneur might give Walmart the facelift it needs to move into the digital era. While purchasing Jet.com alone is not going to magically solve the impending competition that they are facing, it is a start towards a new era for Walmart. One of the factors that is a strength for Walmart is their reputation and global presence. Walmart has a long-standing reputation as the number one retailer in the country, and it is common knowledge among consumers that their tag line is Everyday low prices. Because of its low cost strategy and number one spot as a retailer, they have a lot of loyal customers. Another factor that contributes to Walmart's strength is its global presence. According to Walmart.com, they currently have retail units in 27 countries and online shopping platforms in 10 countries (corporate.walmart.com). On the other hand Amazon does offer international shipping, however, without having established retail units to generate brand awareness in other countries it can be a challenge to get global consumers to use their e-commerce platform. With Walmart's already existing presence in the global community, consumers may be more aware of the retail company and be more inclined to use an e-commerce platform such as Walmart.com or Jet.com. They have an already existing target market that they can market their online shopping platforms to. Walmart should take advantage of their strong reputation and global presence to lead the charge in generating their e-commerce sales. While Walmart has the strengths of a large market and a massive scale cost-leadership retail strategy, it does face some challenges. As companies are moving towards less-rigid structure, Walmart is still considered to have a very bureaucratic corporate culture unlike successful digital companies such as Amazon, Microsoft, and more. Extremely rigid corporate culture can scare away entrepreneurial talent, especially in tech which is what Walmart needs in order to succeed in its e-commerce ventures. In order for Walmart to be on the same competitive level in e-commerce as Amazon, it is important that not only the strategy changes but so does the corporate culture. Another weakness that Walmart faces in the e-commerce space is its hesitance towards allowing third-party sellers onto its marketplace. While they finally did open up their online space to third-party vendors in 2015, there product line up was much less than that of Amazon. This can be seen as an opportunity for Walmart to expand. With its strengths and weaknesses, Walmart has opportunity for growth in its new strategy. As mentioned previously, its bureaucracy is extremely rigid. Luckily, with the right leadership and HR the corporate culture of a company can be shifted. An open and innovative work environment can attract just the right talent that Walmart needs to transform itself into an innovative company. Lore cannot be the only one leading the charge in e-commerce for Walmart, he will need a team of strong engineers, marketers, analysts, and so on in order to achieve success. Another opportunity for Walmart is to take advantage of its grocery department. As mentioned earlier, Walmart is the largest grocer in the United States. If they incorporated more health-conscious food brands into their grocery department and built that into their e-commerce to offer fresh grocery delivery services this could be a direct fight against Amazon's purchase of Whole Foods. Lastly, Walmart can grow its global presence to tackle Amazon's international shipping that is available to global consumers. One of the biggest threats that Walmart is facing is its undifferentiated cost-leadership strategy, as well as its overhead costs of owning brick-and-mortar stores. In today's age of digital marketplaces, online retailers can pop-up out of nowhere and start generating revenue due to cutting the cost of having physical retail stores. Amazon is able to offer low prices on products because they do not have the cost of brick-and-mortar stores and employees to run the store. Other retailers such as Target and Dollar General are also able to offer low-cost products that are substitutes of Walmart's. Walmart will need to add unique products to their lineup in order to compete with Amazon, especially since Amazon offers over 350 million products as of right now. Why would a consumer choose Walmart over Amazon? There will have to be a differentiation between the products that are offered. If Walmart wants to cut their costs, it might be helpful to conduct an analysis on what stores are bringing in the least amount of traffic and revenue. Shutting down less-profitable stores can make room to grow their e-commerce space. Overall, Walmart's strategy to purchase Jet.com as a way to compete with Amazon is a good decision. In order to ensure that this acquisition is fruitful, Walmart will need to take a broader look at their current operations. They should take advantage of their current target market and strong reputation as the number one retailer in the country. On the other hand, Walmart needs to work on creating a more open corporate culture to attract innovative talent, as well as open up its doors to more third-party vendors in order to directly tackle Amazon. As the number one grocer in the nation, this is a great factor to take advantage of against Amazon, especially after their purchase of Whole Foods. Because there are other retailers that offer low costs to consumers, Walmart will need to find a way to set itself apart. Whether it means closing some brick-and-mortar stores to cut costs, or offering more products from third-party vendors to increase their product variety, they must find a way to attract online consumers. The partnership with Lore is promising, and only time will tell if Walmart will be able to dominate Amazon.

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