An aspect of digitalization is that the modern consumer increasingly values being able to shop online rather than brick and mortar retail.
For decades, Wal-Mart was America’s retailer. As you all know, much of this changed when Amazon came on the scene. Many might say that Amazon will be the clear long-term winner due to its head start in the e-commerce space. While Amazon recently became profitable for the first time in its history, I think WMT will be the long term winner – the first major organization to make e-commerce profitable at the largest scale.
Over the past several years, while many retailers have chosen to simply place their own businesses online through a “dot com” presence (e.g. nordstrom.com, macys.com, etc.), Wal-Mart has responded to Amazon in a much bigger way. Here’s a brief timeline of actions they’ve taken in the past year or so:
- Sep 2016 – WMT acquires Jet.com, an e-commerce site, for ~$3 bil. Its CEO, Marc Lore, is hired as Wal-Mart’s Head of E-Commerce
- Mar 2017 – Wal-Mart acquires ModCloth, a trendy women’s fashion brand that sells through the e-commerce channel
- Jun 2017 – Wal-Mart begins testing a program in which its 1.4 million retail associates would deliver products to customers homes after hours
- Jun 2017 – Bonobos, a trendy men’s e-commerce fashion brand, is acquired. Public uproar gains media traction as loyal Bonobos and ModCloth consumers claim their brands have “sold out” to corporate giant WMT
- Sep 2017 – 1,000th online grocery location opened in the U.S. – the service enables customers to order groceries online, and pick up from a Wal-Mart store without leaving their car. Also, WMT remodels its 500th store with the goal of i) faster checkout times and ii) more warehouse space to enable e-commerce deliveries
- Oct 2017 – Wal-Mart announces Mobile Express Returns (returning an item now takes 30 seconds in store vs. 5 min before this program)
In addition to actions they’ve already taken, Wal-Mart’s strategy to compete with Amazon going forward consists of 2 key components:
- Leverage its existing physical and human assets – 90% of the U.S. population lives within a 15-minute drive of a Wal-Mart store and Wal-Mart has 1.4 million retail store employees. WMT is uniquely positioned to be both online and in-store – wherever the consumer happens to be at their time of purchase.
- Focus on Grocery – Amazon’s biggest struggles have occurred in the “last-mile” of their supply chain. As the U.S.’s largest grocer Wal-Mart is uniquely positioned to get groceries to a consumer’s home more quickly and cheaply than Amazon.
In my view, in addition to the above, management should focus on two key things.
First, Wal-Mart should be incentivizing online purchasing. Its consumers value it – 42% of Amazon Prime customers also shop at Wal-Mart. Despite this, Wal-Mart deliberately makes products cheaper to pick up in store than to deliver. I believe this is short sighted. While this optimizes profit for that purchase, each in-store pickup is a missed opportunity to show the consumer how Wal-Mart can deliver seamlessly.
The second is that Wal-Mart is a retail company, while Amazon is a technology company. In today’s job market, top engineers would rather work at Amazon than Wal-Mart. How will management make it cool to work at Wal-Mart?
Still, however the bottom line is this. Wal-Mart already has the distribution network. It’s much easier for Walmart to fix its consumer experience and stodgy brand reputation than it is for Amazon to acquire 4,600 fulfillment centers and 1.4 million employees throughout the U.S.
But what about where Amazon already has a foothold? Should Wal-Mart even try to take Amazon market share in the U.S.’s coastal urban areas, and if so, should they try to do so organically, or through acquisition (should they acquire Target?)?
 “Forget about antitrust: Wal-mart is punching back at amazon.” (2017, Oct 10). Investor’s Business Daily
 Cheng, Nicholas. “Wal-Mart Is Buying Trendy e-Commerce Sites. The Cool Kids Are Not Having It.” Los Angeles Times, 17 Aug. 2017
 Thomas, Lauren. “Wal-Mart Promises 30-Second Returns in Stores, as Amazon Tries to Catch Up.” CNBC, cnbc.com, 9 Oct. 2017
 Dua, Tanya. “The Founder of Jet.com Explains Walmart’s Strategy to Beat Amazon.” Business Insider, Business Insider, 27 Sept. 2017
 Lim, S. F. W. T., Wang, L., & Srai, J. S. (2017). “Wal-mart’s omni-channel synergy.” Supply Chain Management Review, 21(5), 30-37.
 Chen, Oliver, CFA. “How Do You Make Wal-Mart Great Again in the Age of Amazon?” Cowen & Company Equity Research, 10 October 2016
 LaVito, Angelica. “Wal-Mart Raising Prices Online Shows the Difference between It and Amazon, Strategists Say.” CNBC, CNBC, 13 Nov. 2017