business news in context, analysis with attitude

by Kevin Coupe

Seeking Alpha reports that in a conversation with CNBC, Walmart CEO Doug McMillon said that in acquiring e-commerce business Jet for $3.3 billion, ""Basket economics are more attractive to us than unit economics."

Which is interesting - if not particularly surprising - since that was where Walmart's corporate head was at when it went into the groceries business. it was never about just selling food, but rather generating customer traffic and using food to build basket size, especially with the sale of more profitable nonfood items.

But Seeking Alpha also suggests that while the Jet purchase may be "accretive to earnings," it won't solve a potentially more vexing problem for Walmart - the extent to which Amazon is developing an artificial intelligence-driven ecosystem to drive sales and loyalty.

Here's how they frame the issue:

"If e-commerce was a quantum leap in reducing the 'friction' of shopping, then Amazon is on the verge of another quantum leap in reducing the friction of on-line shopping through its Alexa artificial intelligence assistant.

"Alexa is now available in a number of Amazon devices, including Fire TV and the Echo, which I recently profiled. According to the Q2 earnings report, Alexa now has over 1900 skills. Most of those skills involve home automation or opening and interacting with third party apps. The Domino's Pizza app allows you to order your favorite pizza by voice command.

"Most of Alexa's built in skills pertain to home automation or initiating media streaming through Echo or Fire TV. But it's clear that e-commerce is where the money will be for Amazon and its Web Services partners that can employ and develop new skills for Alexa."

I think this is a very good point, highlighting the degree to which Amazon is ahead of both Walmart and Jet in the e-commerce continuum. in fact, I think it can be argued that part of the problem is that Amazon has a much broader definition of its own role and mission - it isn't just about e-commerce, but also about web services and logistics and providing all kinds of content to consumers.

It isn't just about selling stuff.

(Incidentally, the New York Times had a story the other day about artificial intelligence and intelligent assistants like Alexa - and Apple's Siri, and one being developed by Google - and how these companies are essentially trying to create "Star Trek households" where computers are accessible all the time, offering a wide range of services. You can read it here.)

This isn't to say that Amazon has it right, and Walmart/Jet have it wrong. It is just to suggest that they have different views of the world and their roles in it.

The Seattle Times reports that Amazon has launched a new "Daily Dish" service in that city, described as "a delivery service that offers two meals each from two restaurants. The service is an extension of Amazon’s restaurant-delivery service from Prime Now, which offers a wide selection of restaurants for delivery with a $20 minimum ... Daily Dish has a fixed price for each dish, usually between $9 and $12. Each day, Amazon will text you around 9:30 a.m. with the day’s selections — one meat option and one vegetarian option each from two local restaurants. You order through the Prime Now app, with lunch arriving between noon and 12:30 p.m."

The Daily Dish service is available only to Prime members ... but its very existence speaks to how Amazon is operating in one sphere and Walmart/Jet are operating on another.

I do think that everybody has to take a deep breath when considering the potential impact of the Walmart-Jet deal. Over the last few days, I've seen headlines and stories suggesting a wide range of possibilities - from "this is the deal that will allow Walmart to bury Amazon" to "this deal won't affect anything."

I suspect that neither extreme will prove to be accurate. It remains to be seen whether the combination of an e-commerce business that hasn't been able to get sufficient traction with one that hasn't really proven anything yet can add up to a business that can "beat" Amazon, which already must be gearing up for the battle. But I also think it would be foolish to suggest that the combination of these two companies won't have any impact, since the likelihood is for heightened price cutting and marketing that will have consequences for both e-commerce and bricks-and-mortar competitors.

As I said the other day in this space ... every retailer has to ramp up its game. Now.

I love the line from Craig Ostbo: "Either you are at the table, or you are on the menu."

It's going to be a battle. It is going to be intense. And it is going to be an Eye-Opener.
KC's View: