Amazon.com and Walmart are busy reacting to challenges in their retail channels. The outcomes of their strategies are setting up these retail titans for a massive collusion in the Omni-channel retail space. “Amazon and Walmart have become the disruptive titans of today’s business world” says Jim Tompkins, CEO of Tompkins International. The rest of the retailers are playing catch up as they create benefits for their customers at a phenomenal rate.
But what are Amazon.com and Walmart now doing? Amazon.com – by far the leading online retailer is opening physical stores. Walmart – the biggest traditional (physical) retailer is frantically trying to compete with Amazon.com in the online retail channel. In short, Amazon.com is adding Bricks to their Clicks and Walmart is adding Clicks to their Bricks. However, they will both end up as Bricks and Clicks retailers.
Both Amazon.com and Walmart has entered the Omni-retail channel simultaneously to achieve the ultimate title: The World’s Biggest Retailer…
The paths that Amazon.com and Walmart took to the Omni-retail channel
Although the paths that the two retailers took leads to the Omni-Retail channel, they took different routes to reach their destination.
Amazon.com – adding Bricks to Clicks
Amazon.com, the most successful online retailer by far, is now opening physical shops of all kinds – and fast. That begs the question – why? Amazon wants to enjoy the advantages that a physical shop offers.
According to Trevis Team writing in Forbes, Amazon is opening physical stores to: 1) provide a more personal shopping experience to its consumers; 2) reduce shipping costs by providing a store pick up facility; and 3) integrate the online and offline shopping experience for its consumers in addition to creating a strong brand image. It is adding Bricks to Clicks then…
Nathan Cohen-Fournier and others from Tufts University suggest that Amazon’s ability to maintain its dominating position in e-commerce is under threat. Once competitors catch up with Prime and same-day shipping (Walmart and Ebay already have similar offerings), consumers will demand even lower prices and differentiation. In this regard, Bricks-and-Mortars have the lead, due to immediacy, trial-touch-feel, and ease-of-return. Also, essentially, Amazon is choosing growth over profits says Mac Bartine in Quora.
“Does this mean that Amazon will have to open more Brick-and-Mortar stores than just the one in Seattle?” asks Wayne Rash writing in eWeek. Perhaps, but it’s unlikely it could reach the penetration of Walmart.
The ultimate answer likely will mean more innovation from both companies—and that means consumers will benefit.
Walmart – adding Clicks to Bricks
Walmart has a long history of taking the best of what other companies do and incorporating it into their own business model. It is now doing its best to oust Amazon. But, in a world that has quickly gone digital, where Amazon has continually refined and improved its delivery options, Walmart has not quite come up with an answer to challenge the online leader.
Wayne Rash suggests that Walmart did not succeed to challenge Amazon with online sales. Products on Walmart’s website rarely were cheaper than Amazon’s and fast delivery only happened if the desired product was already in a store near you. Walmart’s online offerings were broader than one usually finds in their brick-and-mortar stores. However, Amazon always had more offerings to choose from.
For a long time, Walmart had an edge over Amazon simply because it had a network of stores. “However, by building up its Prime membership, which offers free two-day shipping, and increasing its shipping capacity and options, Amazon has made that edge less relevant” writes Daniel B. Kline in the Business Insider.
All Bricks-and-Mortar chains, not just Walmart, have struggled because they haven’t sufficiently adapted to the fact that retail on the web is a harsher environment compared to what they face on land.
The clash of equals in the Omni-retail channel
So, if Amazon.com and Walmart will face off in the Omni-retail channel, what will happen?
Both retailers are treading on each other’s strong points, challenging each other’s competitive advantages. For Amazon opening physical stores it means it customer’s expectation can be met regarding the shopping experience. Amazon’s customers can now enjoy shopping at their physical stores, using their senses to experience the products. They will however still enjoy the advantages that Amazon offers as a leading online retailer.
Walmart, on the other hand, has hundreds of physical retail outlets, with proficient staff that know how to please customers. Walmart is the master of merchandising and decorating and fitting a shop to encourage customer patronage. What Walmart however realise, is the need to do business online the same or even better than Amazon. Walmart doesn’t have the skills or the organisational culture to confront Amazon successfully on its own. It is therefore unsurprising that Walmart acquired Jet.com to jump-start their online sales.
Who will be the winner of this epic battle? It will probably be the retailer that knows and satisfies the needs of their customers the best. As Jim Tompkins remarks that there are five elements that every counter-offensive must have for retailers to thrive nowadays:
- Store Fulfillment
- Same-Day Delivery
- Demand-Driven Value Network
Tompkins notes that it is not about how much you sell online, but about the impact of online sales. Therefore, as a small Bricks and Clicks retailer – don’t even bother to compete directly with the Amazons or Walmarts in the Omni-Retail channel. Rather identify a niche market and develop your brand to provide the customers the best Omni-retail channel experience they could ever wished for.
Nathan Cohen-Fournier, Adolfo Gatti, Angelica Nouhi 2016. AMAZON VS WALMART – REAL VISION CASE COMPETITION, Fletcher School of Law & Diplomacy, Tufts University