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Advertising Age has a piece about the coming battle between Walmart and Amazon, saying that Walmart “could use a bigger dose of what gave Amazon 44% top-line growth last quarter,” while at the same time “playing defense against Amazon's increasingly aggressive moves into packaged goods.”

Some excerpts:

• “Walmart would love Amazon's top-line growth, but isn't about to settle for its profits. Building staff and infrastructure to support the growing general-merchandise business and rising media-content costs produced disappointing third-quarter profits and projections for a possible loss in the all-important fourth quarter at Amazon. That has some Walmart suppliers believing that while Amazon presents a growing threat, Walmart is better positioned to grow profitably in e-commerce.”

• “Key to Walmart's emerging e-commerce strategy is integrating store and online marketing like never before. That's meant removing barriers between Bentonville and the Brisbane, Calif.-based”

“There are also changing incentives. As of the new fiscal year beginning Feb. 1, Walmart's store managers and employees will get credit for online sales from their territory, just like sales in the store. That will give them more reason to promote, the new iPad app, My Local Walmart Facebook app, and its soon-to-be-released refurbished iPhone app to the 140 million weekly in-store shoppers.”

• “Walmart is also trying to use its 3,800 stores and 150 distribution centers as a logistical and marketing advantage over Amazon. Last month it rolled out ‘Home Free’ delivery, with free shipping on orders over $45 from its stores -- sans a $79 membership fee like Amazon Prime. And Mr. Anderson said in October that Walmart plans ‘next- day delivery at a very economical price’ using its stores as distribution centers and aimed largely at urban markets.”

• “E-commerce may also help Walmart profit from the upscale shoppers it has had trouble appealing to since its latest strategic reversal. In the past year, to appeal to its core consumers in the $30,000-$60,000 income range, it added back 10,000 items and millions of square feet of display space, something it had previously cut to make stores more visually appealing to upscale shoppers. Predictably, trips and spending among wealthier households suffered, according to Consumer Edge Research.”

Along these same lines, reports that Walmart Labs has acquired a company called Grabble, described as a company that started in an Australian garage and that now “produces a point-of-sale technology that integrates with mobile phones. With the rise in NFC-enabled devices, (this will) allow consumers to make purchases using only their phone or tablet.

Terms of the deal were not disclosed.
KC's View:
Not be snarky about this, but we’ve been making the point around here for quite some time that the ultimate battle will be between Walmart and Amazon, and we’ve talked about projections that in 2020, based on current growth rates, the two companies will be about the same size. And maybe earlier. So it is no wonder that Walmart hears footsteps...

Ultimately, the biggest challenge to Walmart in this venue may be the fact that it is unwilling to sacrifice short-term profits in service of the long-term game. What Amazon has been able to do - and yesterday’s piece about how the company is willing to lose money while adding services to its Prime program, with the goal of increasing loyalty, is a prime example of this - is continue to identify and communicate with customers on a one-to-one basis. That’s been the ultimate goal, and despite the fact that Walmart clearly wants to play in this sandbox, I’m not sure we’ve yet seen the evidence that it is willing to do everything necessary to compete with Amazon’s approach.

Now, Walmart’s feeling probably is that it wants to change the game - that its brick-and-mortar infrastructure, including the small stores it is building around the country that in part will serve as delivery depots, will help it compete effectively.

But I believe that customer knowledge - not brick-and-mortar infrastructure - will be the winning formula in the long run.

This all matters to companies not named Walmart or Amazon because this conflagration is going to suck up a lot of the oxygen in the retailing room, and help define how everybody competes - what prices they charge, what products and services they offer - sooner rather than later. It means that not only does pretty much everyone have to figure out how to compete online, but also how they are going to use their online offerings to distinguish and differentiate themselves, not just keep up with the big guys. You have to innovate, not just mimic. You have to invest, not just spend. And you have to play the long game.