Walmart takes on Amazon Case

Question 1

Trends: why groceries were one of the last things to be adopted for online

Answer 1

• want to “experience” the product
• can’t control quality of produce, etc.
• timing/cost of delivery
• storage is challenging since many temperatures needed
• low margin business –> hard to make e-commerce distribution channels profitable
• hard to execute on perishables, refrigerated goods
• -> much more costly

Question 2

Trends: why buy online/factors in buying online

Answer 2

• demographics:
• ->people living in metropolitan areas, age (younger) , income level (higher), education level
• if the goods are predictable (ex. diapers)
• ->repurchasing is higher
• willingness to pay for rapid delivery
• value of the convenience of online shopping
• showrooming–> look at store, see physical, then buy it online
• price
• where the item was delivered or picked up
• ->consumers worried about theft
• ->if perishables, worried about weather

Question 3

Walmart’s strengths

Answer 3

• rural areas
• ->cuts costs, can drive out competitors, can make stores bigger
• low-cost strategy
• technology
• ->computerized inventory tracking, data-driven storage
• -> this tracking leads to high turnover
• huge stores, huge selection
• ->customer can have one-stop shopping experience

Question 4

Why Is Amazon a threat

Answer 4

• bought whole Foods –> direct threat
• Walmart relies heavily on sales of groceries
• Amazon is growing much faster
• Amazon has diversified revenue
• Amazon has lower prices on average than Walmart
• -> this is the main thing that cause threat
• Amazon has greater selection
• ->since has virtually no costs for adding new items
• only 13% of Walmart’s loyal customers shop online at Walmart.com, whereas 30% shop at Amazon
• ->Walmart needs to be better at monetizing these customers

Question 5

What Walmart does better than Amazon?

Answer 5

• stronger omni-channel right now
• Walmart in traditional retail, Walmart adapts
• has customers in rural areas already
• geographic coverage of Walmart
• -> 90% of population within 10 miles of Walmart (US)

Question 6

What did Walmart do to push into e-commerce space

Answer 6

• built infrastructure to support it (22 fulfillment centres)
• lots of acquisitions (14 from 2012-2016 + Jet.com later; Kosmix for algorithms to help with customer acquisitions)
• ->Jet.com was a way to get Marc Lore who had worked at Amazon previously
• -> acquisitions a way to enter the market much faster
• hired 3000 Silicon Valley engineers
• Partnerships
• ->with Google (enables voice ordering), Uber, Lyft, Dely (enables delivery)
• spent billions on developing e-commerce
• developed mobile app
• “Project Pangaea” –> new cloud infrastructure
• Walmart’s e-commerce sales grew by 5x
• ->reached 16 billion in online sales (represents online 4.3%)
• -> but money still has overall very little impact

Question 7

What does Walmart think of this strategy? I.e. how do they integrate their strategies together, how do they see e-commerce?

Answer 7

• leadership sees e-commerce fit as a way of informing our customers
• ->know what they have in stock
• website can compliment what’s missing in stores
• see e-commerce as supporting physical stores

omni-channel advantage (describe elsewhere)

Question 8

describe Walmart’s omni-channel advantage (ie how can they create synergies)

Answer 8

• customers have more options
• ->can order online and pick up in store (40% use this)
• much more flexibility offered to consumers
• also when customer go to Walmart stores, nearly half of them would spend an additional $60 in the store
• some customers may not trust online payment
• -> more payment options
• customers can change their mind when picking up
• customers can make in store returns

Question 9

Amazon’s strengths

Answer 9

• scale in both demand and fulfillment capacity
• ->also perfected customer service in delivery –>fast and accurate
• strength of brand
• cost leader and customer focused
• ->lots of customer data, can determine what customers want (personalized recommendations)
• diversified into services
• -> music and video streaming, leadership in Cloud through AWS
• -> Amazon can compete on price because it has other sources of revenue
• good logistics
• ->robotics company to help with logistics in fulfillment centres
• growing adoption of Prime
• -> fosters loyalty among profitable consumers
• Amazon is risk taker
• -> has strengths and weaknesses
• strength of technology
• -> can use their online tech strategy to have innovative physical stores
• Amazon allows third-party sellers
• ->allows expansion of selection, but with no risk to revenue
• -> get revenue from listing

Question 10

describe the general perspective about e-commerce

Answer 10

• costs of fulfillment high
• brick and mortar stores see e-commerce as a necessary evil
• -> see it as necessary, for long term, but don’t have results to show stakeholders in short term
• value of omni-channeling
• -> customers want flexibility

Question 11

who is more profitable: Amazon or Walmart?

Answer 11

Walmart