W6: Amazon vs. Walmart: Clash of Business Models (SMU) Flashcards
Walmart
Retained its position as the world’s largest company by revenue. Excelled in brick-and-mortar retail, emphasising low prices and strategic partnerships
Amazon
Surged to become the second largest company. Despite Walmart’s revenue lead, Amazon’s market capitalisation exceeded Walmart’s significanty, highlighting the shift towards e-commerce. Amazon dominated e-commerce by offering convenience and a vast product range
E-commerce
Has experienced rapid growth in the US, primarily led by Amazon, whose online sales outstrip those of the next 49 retailers combined. This trend has been further accelerated by the pandemic, which prompted a surge in online shopping and a decline in brick-and-mortat stores.
US apparel market
The largest worldwide, is witnessing increasing competition from online sales channels, particularly Amazon. While online shopping offers unparalleled convenience and accessibility, it presents challenges such as the inability to physically examine products and high return rates
Returns
Significant pain points for retailers as they not only add to logistical complexity but also impact profitability. Despite these challenges, retailers with an omni-channel presence are better positioned to address customer preferences and mitigate the impact of returns, thereby enhancing overall customers satisfaction and retention
Online grocery sales
Growth increased due to the lockdowns and social distancing measures. It has slightly declined, but the convenience and safety have entrenched new buying behaviours among consumers. Retailers face challenges in maintaining freshness, quality, and affordability, especially with regards to the last-mile delivery logistics. Consumers prioritise faster delivery or specific time slots, which pose logistical and economical hurdles for retailers. Also, the economics are complex, with low margins and high fulfillment costs posing profitability challenges
Walmart’s history
Founded in 1962. Revolutionised the retail industry with its focus on EDLP. Commitment to affordability, coupled with strategic expansion and operational efficiency, propelled Walmart to become a dominant force in the retail landscape. It had a strategic approach to store placement
“Inside-out” radial expansion
Involved store placement targeting smaller towns and rural areas, where real estate costs were lower and competition from existing retailers was limited. Walmart capitalised on underserved markets and minimised overhead expenses. The strategy further optimised logistics and reduced operational costs by positioning stores and warehouses in close proximity to one another
Everyday low prices (EDLP)
A pricing strategy characterised by infrequent promotions and a focus on maintaining consistently low prices. Walmart’s commitment to EDLP resonated with consumers seeking value and affordability
Walmart’s culture
Centred around frugality and operational efficiency. Everyone was encouraged to identify cost-saving opportunities and streamline processes. The culture of frugality permeated every aspect of its operations, driving continuous improvement and cost optimisation
RetailLink
Proprietary intranet that facilitated transparent communication and data sharing between Walmart and its suppliers, enabling real-time inventory management and performance tracking
Amazon
Founded by Jeff Bezos as an online bookstore, evolved into a global retail giant offering a vast array of products across 36 categories by 2021. Their focus on customer-centricity and long-term market leadership set it apart, driving continuous innovation and expansion
Marketplace
Introduced by Amazon in 2000 and revolutionised online retail by allowing third-party sellers to leverage its platform. It expanded Amazon’s product offerings and customer base, with third-party sellers contributing 60% of the company’s gross merchandise value (GMV) by 2020. Its success reflected Amazon’s commitment to fostering a thriving ecosystem for sellers while enhancing customer choice and convenience
Amazon Prime
Launched in 2005, and transformed the retail landscape by offering members unlimited free two-day delivery and a host of additional benefits for an annual subscription fee. The service drove customer loyalty and spending with Prime member spending four times as much as non-members. Amazon continuously enhances Prime’s value proposition with services like Prime Now and Prime Wardrobe, cementing its position as a leader in customer-centric innovation
Prime Now
Provides two-hour grocery delivery
Prime Wardrobe
Provides try-before-you-buy apparel shopping
AmazonBasics
Marked Amazon’s foray into private label brands in 2009. By leveraging customer data and market insights, Amazon expanded its private label offerings across various product categories, capitalising on gaps in the market and consumer prefernces. Their strategic approach to brand development, together with its vast distribution network, led to success in private label brands, challenging key players and driving growth in key product segments
Last-mile connectivity
Addressed by further expanding its physical presence, e.g. by investing in innovative delivery solutions and strategic acquisitions. Amazon Lockers and Prime Air drones revolutionised package delivery, while acquisitions like Whole Food provided it with a foothold in the grocery market and access to valuable customer data
Out-of-box services
Offered innovative solutions for secure package delivery and enhanced customer convenience, e.g. Amazon Key and Amazon Hub Lockers
Amazon Key for Business
Further streamlined delivery processes for apartment complexes, demonstrating Amazon’s commitment to addressing evolving customer needs and preferences
Prime Air
Investment in Prime Air and air cargo hub showcased ambition to reduce dependence on traditional delivery partners and improve delivery efficiency
Amazon’s advertising business
Emerged as a significant revenue driver. The platform leveraged its customer data and e-commerce ecosystem, positioning Amazon as a formidable player in the online advertising industry. It became a key competitior with Meta and Google in the digital advertising space
