retail news in context, analysis with attitude

by Kevin Coupe

DailyFinance.com has a story saying that Amazon needs to "start looking over its shoulder" now that Walmart has begun testing its Walmart To Go concept in Denver, Washington, DC, and some other metro areas.

The argument is that "Walmart To Go will work for the very simple reason that Walmart is not really a retailer. It is a logistics company that simply owns a lot of stores. Walmart's success is built on its ability to move a lot of merchandise to its stores quickly and efficiently." And because "Walmart To Go customers don't have to pay a membership fee, and the service currently offers free shipping or a small delivery charge," DailyFinance.com suggests that Walmart's offering will be a feisty competitor to Amazon's Prime membership service, which has an annual fee.

In addition to being able to stand up to Amazon, the story says, Walmart's online offering will have an even greater impact on other, more traditional retailers:

"The most likely scenario would be that Walmart To Go will speed up the retail apocalypse. The most likely victims of Walmart home delivery are drug store chains such as Walgreens, dollar or small box retailers, Kmart, category killers such as Toys R Us and Best Buy, and, of course, Target. Target could be the biggest loser because Walmart to Go and Amazon.com Prime are aimed squarely at its core customers: hip middle class shoppers … The wild cards in this equation are Costco Wholesale, eBay, and grocers such as Kroger Co. and Safeway. Costco, eBay, and Kroger are all experimenting with home delivery services of their own. Any of these companies or a combination of them could pose a challenge to Walmart. One interesting possibility is that some of these retailers might form a home delivery alliance to challenge Walmart and amazon.com."

But, the analysis seems to favor Walmart: "Walmart To Go could change the retail landscape completely," the story says. "Instead of being a dinosaur facing extinction, Walmart might be the monster that dominates the online retail market just as it dominates the big-box category."

Or not.

I'm tempted to leave my commentary there, but I think the blatantly pro-Walmart perspective requires something a little bit more. (I am self-aware enough to realize that many folks in the MNB audience believe that much of my commentary is blatantly pro-Amazon. While I'd prefer to argue that a simple analysis of the facts supports any pro-Amazon conclusions, it's probably simpler and easier to just plead guilty and move on…)

Listen, all those things could be true about Walmart's online adventures. It could prove to be an e-n e-commerce game changer, and certainly the Bentonville Behemoth is investing a ton of money in its Walmart Labs initiatives. But the Daily Finance analysis presumes that Amazon's offering is somehow going to remain static, and I don't think history supports any such conclusion. In addition, there are a ton of legacy issues that Walmart must surmount in order to become "the monster that dominate the online retail market." They can be dealt with, but not easily.

(I was in a Connecticut Walmart over the weekend that was dirty, badly merchandised with loads of empty shelves, and with a front end that was a nightmare … in fact, the only thing that the store seemed to have going for it was a full parking lot and crowded aisles. While this suggests to me that Walmart has a strong and highly defensible market position in the lowest-common-denominator retail segment, it does not auger well, IMHO, for a leap into state-of-the-art, progressive, innovative 21st century online retailing.)

I do think that the suggestion that some of the bricks-and-mortar competitors to both Walmart and Amazon could come up with an alternative service option is an intriguing one, and such an effort might well be supported by a supplier community that may be looking for ways to reduce the clout exercise by the Amazon and Walmart.

The argument that Walmart will dominate online because it essentially is a logistics company that happens to own a bunch of stores is an interesting one, especially because you could just as easily argue that Amazon is a logistics company without a lot of stores weighing it down. Amazon, without the legacy issues with which Walmart must deal, can be more nimble and more focused on the customer, as opposed to a bloated business infrastructure. Note that I write can be. Not is.

We're still in the early innings when it comes to e-commerce, and there are a lot of ways this could play out. Any and all of these companies are capable of coming up with innovative and sustainable business strategies that will be gamer changers for them and their shoppers. Just as any and all of them are capable of screwing up and missing the next great tectonic marketing shift, leaving them adrift and irrelevant.

I know where I'd place my bet, if I were going to make one. Others are free to places their bets wherever they like.

I do think this: Bricks-and-mortar retailers don't have to worry that e-commerce is going to take over the world and make all of them irrelevant and obsolete. But they need to behave as if it will.

Let's not forget that in placing our bets, we're all gambling. Because, as the great screenwriter William Goldman said in a different context, "Nobody knows anything."
KC's View: