The competition between online and offline retail is heating up. Online contender Amazon has reached $34 Billion in sales while brick and mortar Walmart dwarfs that with its $300+ Billion in sales. Doesn’t seem like much of a match, but as the charts below reveal, Amazon is growing quickly riding the crest of advancing technology and changes in consumer shopping culture.
The growing clash between these two iconic companies tells us a lot about where we are in the evolution of retail shopping. The battle may not be about which company is best, but about how people want to shop.
Mobile and ecommerce have big implications for POS and POP. Already shoppers are visiting Best Buy, Walmart, and other stores to check products, then going online instead to buy them via Amazon or eBay. It’s one more challenge for POP marketing but an exciting one calling for innovative POP solutions.
Eretail Picking Up Steam
eretail has everything going for it. Forrester Research forecast eretail to grow to grow 62% to $326 Billion in 2016. (emarketer says 361 Billion just for B2C commerce). Both Walmart and Amazon are trying to lead the eretail revolution. Some suggest Amazon will reach $100 Billion in sales by 2016. Does the company have a world domination plan?
How Important is the Future?
Both companies have tremendous strengths. While Walmart’s brick and mortar operations are a drain on revenue, current ecommerce stats show physical stores actually aid ecommerce sales. But will that be true 5 years from now when both companies have to cut costs to the bone? Is the real issue the number of distribution centres each has and how quickly they can fulfill orders? If so, Amazon will have to wake up and build plenty of new distribution centres.
I recently read one research report that suggested that the reason for a company’s success wasn’t their management, sales team, innovation, or employees. Instead, the number one reason businesses succeed is the fact they were riding on a wave of technological or cultural change. Amazon then, with its multitude of web properties appear to be better positioned than Walmart to dominate global, US and Canadian retail. This chart shows how it is outpacing the industry.
While Walmart is selling more via its website and is now offering same day shipping, Amazon is not opening up retail stores. That fact alone may tell you who is going to win this battle. Amazon is the underdog and its recent financial reports revealed a substantial loss, which can scare off investors.
Is the Tablet the only way Consumers will Shop Online?
Amazon just launched its latest Kindle tablet. Was it a return to its roots as an online book seller or a strategy against Google who might shut them out of eretail if they don’t come up with a device to compete with the Nexus tablet? Besides competing with Google, Amazon is fragmenting into other areas such as Amazon Prime Video (Netflix going out of business because they can’t acquire content — will that be Amazon’s fate too?). Amazon with its A9 cloud based search engine has potential to provide product search service to millions of ecommerce sites – a great way to build its own sales network online, but Amazon hasn’t promoted it.
Google had the iconic Industry leading Yahoo pinned against the ropes a few years back, and Yahoo landed on the canvas and hasn’t gotten back up. Page and Brin kept their eye on the big picture and won big. Amazon is staring at the same opportunity. It could zoom past Google and Apple and become the world’s biggest, wealthiest company.
And Bezos started all this from his basement back in 1995. Was it his brilliance or was he just born at the right time?
Capturing the Holy Grail: Consumer Attention
Winning the online shopping wars is especially lucrative because you can sell much more than sporting goods, food, clothing, and electronics online. If you have access to 400 hundred million shoppers now, and more in future, it opens up endless possibilities for products and services. Walmart knows this too, however Amazon has the better business model. Walmart doesn’t sell luxury goods. Who would buy a Mercedes Benz, Rolex Watch, Carradan Skis, Cannondale Mountain Bike, or even a women’s Coach or Gucci handbag at Walmart?
There is the further question about demographics too. Walmart customers are on the lower end of the income spectrum while Amazon’s may be more upscale. Amazon offers an infinite variety as a marketplace, something future Walmart shoppers will find to their liking. The problem is Amazon’s weak branding. Walmart loyal shoppers don’t know what Amazon is and most consumers have trouble getting past the “we sell books” brand image that’s still hanging around.
Have you seen much Amazon advertising lately? No, and it’s another indication that Bezos just doesn’t get it. His objective should be simple: promote Amazon hard and deliver lethal blows to Walmart. Amazon doesn’t have retail staffing and display costs, so wouldn’t investing those funds into promotion and advertising be a sign of business wisdom?
Amazon’s lower cost of doing business gives it incredible leverage over Walmart which is under constant price and retail management pressures. There’s a unionization storm brewing for the company. Walmart’s fall will be slow, but Amazon will likely decide how fast that fall will be. Walmart is still expanding like it will put its direct competitors out of business yet the cost of building these brick and mortar supercenters is staggering. This is the perfect time for Amazon to offer superlow prices and watch Walmart collapse under its own weight.
Allowing Walmart to develop its eretailing and same day shipping services is akin to assisting your opponent to their chair during your bout, so they’ll be better ready for the next round!
If Amazon were to rise to retail supremacy, what changes packaging and promotional display will be required? Will every promotion have an online tie in? Will QR codes and SMS text messaging play a dominant role in retailing? How do you keep a customer in the store knowing they’re just checking prices on their iPad, Kindle, or Nexus tablet? POP campaigns may need sweeten the instore value proposition. Will you need to consider integrated marketing?