The world's two largest retailers were destined to find each other across a crowded globe. Their combined reach and ambition made it impossible for them not to cross paths - and swords.
Walmart's bulk, scale and relentless expansion has begun to test terrestrial limits. Challenges in China and India of a politically motivated basis as well as embarrassments like the bribery scandal in Mexico and the slowing growth in the US make the exploration of new modes imperative.
Amazon, likewise, finds its internet sales tax advantage under attack and almost certainly doomed now that ecommerce is no longer a novelty. The cost in lost jobs and tax revenues make the company an easy target even as it eschews fat margins to reinvest in its own growth.
So they appear fated to search in each others markets for new opportunities. But the battle will be intense and expensive. Both have smart, tough management teams, astonishing IT capabilities and state of the art logical and.or supply chain strengths.
The world may or may not be big enough for the both of them, but it will be interesting to see if one is able to gain advantage on the other. JL
Barney Jopson reports in the Financial Times:
Walmart is moving beyond its core low-income customers in its ecommerce business as the retailer challenges Amazon head-on by wooing better-off Americans who are in the sights of its online-only rival.Executives at Walmart said that as it ramps up its digital investments it is serving high-income consumers online as well as its store shoppers, whose annual household incomes typically range from $30,000 to $60,000.“We own what we own, and we’re going after what we don’t,” Neil Ashe, chief executive of Walmart ecommerce, told the Financial Times. “We can get to every customer in the world via ecommerce. It doesn’t matter where they live or how much they earn.” Higher-income consumers tend to do more of their shopping online.
Following previous failed pushes online, Walmart is again ramping up its efforts to catch up with Amazon, stoking intensified digital competition in the biggest markets where they overlap: the US, the UK, China and Japan.
Analysts expect Walmart to generate global revenues of $491bn in the current financial year. Walmart forecasts that its online sales will be more than $9bn this year, less than 2 per cent of the expected total.
Amazon had $61bn in global sales last year, when Cathy Beaudoin, head of its fashion business, told the Financial Times: “We know that over half of the most affluent Americans have shopped on Amazon in the past 12 months. So we have an incredibly affluent customer base.”
Referring to annual household incomes, Joel Anderson, chief executive of Walmart’s ecommerce business in the US, said: “Certainly we have the $30,000 to $60,000 [customer], but we also have the $60,000-plus and the $100,000-plus customer.”
At its ecommerce headquarters in California this week, Walmart told journalists its ability to fuse digital assets with shops gave it a clear advantage because, for example, it could use its 4,000-plus US stores as warehouses to fulfil online orders quickly.
Walmart, however, mimicked Amazon by announcing that later this year it would begin testing self-service lockers that customers can use to receive online orders in about a dozen stores.
Amazon has its own lockers in stores including Staples and Rite Aid. Walmart stressed that the retailer’s less well-off shoppers were also shopping from its website in large numbers, often on smartphones rather than computers. But alluding to the 50-year-old retailer’s commitment to low prices, which Amazon itself adopted when it opened in 1995, Mr Ashe said “affluent people want value too”.
He added: “We won’t get to the fringes. I don’t think you’re going to see a Piaget watch on Walmart.com in the foreseeable future.”
Mr Ashe said Walmart was not going head-to-head with Amazon everywhere, noting that Walmart had businesses in Brazil, Mexico, Argentina and Chile and Amazon did not, and that media products were more important to Amazon than they were to Walmart.
“The Venn diagrams overlap, but it’s not a perfect overlap like people would make it out to be,” he said.
In a study last year, Forrester Research found that the proportion of people who had shopped online in the previous three months rose steadily from 62 per cent among households with income of less than $25,000 a year to 84 per cent among those with more than $100,000.
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