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Amazon Beats Walmart Again in Latest Showdown

Amazon Beats Walmart Again in Latest Showdown

Friday, 18 September, 2020 - 06:45

If imitation is the sincerest form of flattery, then retailing rivals Amazon.com Inc. and Walmart Inc. have been offering each other some serious compliments lately.


Bloomberg News’s Spencer Soper reported this week that Amazon is planning to add 1,000 small delivery facilities to suburbs and cities, giving the e-commerce giant more of the proximity to its customers that Walmart has long enjoyed. That came shortly after the launch of Walmart+, a membership program that is an answer to Amazon’s Prime subscription, and a statement by Walmart that it continued to be interested in investing in TikTok Inc., moves that show the big-box chain’s desire for its business model to look more like that of the tech company.


As Amazon and Walmart each try to gain an edge or neutralize advantages seen in the other, the end result is that the two are becoming more like one other. How successful each is with these moves and countermoves will shape how their rivalry plays out for years to come. In this latest round, Amazon’s move is perhaps less bold but seems more certain to work, giving it a win this time in the ongoing shopping showdown.


For Amazon, speed has always been central to the promise of Prime, and while that once meant two-day delivery, it increasingly has been redefined as same-day. The new small-format facilities, especially if strategically packed with most frequently ordered items in that area, should help with that.


Walmart has long argued that its vast collection of physical stores is a help, not a hindrance, in its e-commerce pursuits. The retailer says 90% of Americans live within 10 minutes of a Walmart store, a setup that has been particularly helpful in its positioning for grocery delivery and pickup. Its stores have served as fulfillment centers for these goods, helping the chain to get orders into shoppers’ pantries and refrigerators more quickly than if they were being ferried from a far-flung distribution center. Essentially, Walmart’s stores act as mini warehouses already, and Amazon’s embrace of small outposts closer to where people live is an indirect acknowledgment that there’s some benefit in that model.


Meanwhile, Walmart+ is a variation of the successful Prime subscription model. For $98 a year, members get free delivery of groceries and certain other orders, as well as such extras as discounts on fuel. It’s cheaper than Prime, which costs $119 per year, and has clear value to people who already do plenty of shopping at Walmart. But Prime is so entrenched at this point with its roughly 150 million members and loaded up with non-shopping goodies such as TV programming that it’s hard to see Walmart peeling away many people from that group.


Maybe that’s OK; there are plenty of people who have only recently stepped up their online shopping amid the pandemic, especially for groceries, and Walmart has a decent shot at winning them over. Amazon may have a bigger selection, but I find Walmart’s website better designed and easier to use — a valuable distinction for time-starved shoppers. Bottom line: I highly doubt Walmart+ will make a perceptible dent in Amazon’s subscriber count. But if it allows Walmart to defend the customer base it already has and attract customers that aren’t locked in to Prime yet, it’s probably worth doing.


While the arrival of Walmart+ wasn’t a surprise — it’s the evolution of a grocery delivery program the company had been piloting for a while — its decision to join the TikTok fray surely was. In August, the company said it had joined with Microsoft Corp. in pursuit of the social media juggernaut owned by ByteDance Ltd. Later, after reports that Oracle Corp. had been selected as TikTok’s US partner, Walmart released a terse statement saying it was still interested in investing in the company. Whatever TikTok’s ultimate fate, Walmart revealed something of itself by parachuting into the competition. TikTok, in theory, would help Walmart bolster its nascent digital advertising business and its marketplace for third-party sellers. In other words, it would help Walmart shore up areas of business that have helped with Amazon’s growth and profitability. It was already clear those were areas of focus for Walmart, but chasing TikTok made it clear just how aggressive it is willing to be in its pursuit of revenue streams that would give it a more Amazon-like profile.


Even though the pandemic has pushed a great deal more purchases online, I expect consumers will continue to bounce between e-commerce and brick-and-mortar shopping for a long time. That will likely leave Amazon and Walmart to continue encroaching on each other’s turf — and taking inspiration from each other in the process.


Bloomberg


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