Can Walmart Catch Amazon In E-commerce?

When Amazon began selling more than just books in the late 1990s, it suddenly entered into rivalry with the biggest name in retail. Always low prices, always Walmart. Walmart has been at the forefront of American shopping for 58 years. It employs more people than any other company in the world. And 90 percent of Americans live within 10 miles of one of Walmart's more than 4,700 stores in the United States. The staggering size of Walmart escapes people. It is the largest corporation in the world in terms of revenue. However, when it comes to e-

commerce

, Amazon is the undisputed leader, with 38.7 percent of the market share, compared to Walmart's 5.3 percent.

And with the global pandemic forever changing shopper behavior, mastering online shopping is now paramount. So if you're that second site, you have to be really good. You don't have to be as good as Amazon, because no one will get there. That is a utopia. In perhaps its clearest competitive move against Amazon to date, Walmart is now launching Walmart Plus. The membership program is intended to rival Amazon Prime, offering benefits that cannot be replicated online. These guys are going toe to toe and no one wants to stop swinging. Nobody wants to turn back. You know, the consumer is ultimately the beneficiary, clearly.

Here's a look at how Walmart Plus compares to Amazon Prime and all the other ways Walmart is playing

catch

-up as the pandemic makes online shopping an increasingly crucial part of doing business. . Walmart has been working behind the scenes since at least 2018 to create a competitor to Amazon Prime. Based on our data study, we found that two-thirds of people who had already joined our premium loyalty program would join another one. Although the homepage says Walmart Plus is coming soon, the pandemic delayed its planned spring launch. Walmart stock rose seven percent when it looked like it would launch in July, but that didn't happen either.

When Walmart Plus becomes available, members will likely pay $98 for benefits like unlimited same-day grocery delivery at the 1,600 of its more than 4,700 stores that now deliver groceries. When we did our data study, 81 percent of consumers joined Amazon Prime because free shipping was faster. Only two percent joined because of grocery delivery. So I think it's a real opportunity to take advantage of what they already have in groceries and maybe what Prime doesn't have. And just this week, Walmart announced a partnership with Instacart, testing same-day grocery delivery in four markets in California and Oklahoma. Other rumored perks include early access to sale events, discounts at gas stations outside of Walmart and at Walmart-owned Sam's Club stores, and reserved parking spaces in store lots.

If you think about Prime, 150 million, why would you face that? If you take a unique approach, which Walmart seems to be doing, you may be able to get a lot of those customers. Amazon launched Prime for $79 a year in 2005, at a time when Walmart's profits were larger than Amazon's entire revenue. If you look back in 2005, Prime had a benefit: fast, free shipping, two-day shipping, which was unheard of. Fifteen years later, about 150 million Prime members pay $119 a year for one-day shipping on more than 10 million items with no minimum purchase amount, same-day shipping on about three million items, delivery of groceries in two hours in more than 2,000 cities, deals and sales events like Prime Day and access to Amazon's entertainment arm, Prime Video, Amazon Music, Prime Reading, Prime Gaming and Amazon Photos.

It's a pretty compelling value proposition, and that's what anyone will have to deal with, what if they want to try to compete with Prime? Walmart doesn't have any entertainment offerings of its own, now that it sold Vudu in April. Prime members make up about 65 percent of Amazon customers and the program has a 95 percent renewal rate after two years. Walmart began pursuing this type of loyal customer in May 2019 by offering free next-day delivery on orders over $35, less than a month after Amazon announced its default one-day shipping. With Walmart Plus, all orders will have free one-day shipping by default, just like Prime.

Despite the launch of Walmart Plus and free expedited shipping, Walmart still lacks one big thing that Amazon has: high inventory volume. Walmart.com has about 50,000 vendors selling items online, while Amazon has 8.7 million. That's why in 2016 Walmart bought online discount retailer Jet.com for $3.3 billion. The acquisition created relationships with a number of brands that were already comfortable selling on Jet.com. They're on track to quadruple their online business since they acquired Jet. It was an uh-oh moment for all the other brick-and-mortar retailers, because now the biggest brick-and-mortar retailer is moving a lot online. E-

commerce

is a game of scale and you want to get the most out of your fixed infrastructure.

And as you grow, the cost of goods decreases and you gain more leverage. Marc Lore spent two years at Amazon before leaving to found Jet.com, working to undercut prices at e-commerce megastores. Walmart's purchase of Jet.com was the big step that took it into the big leagues of online shopping. When the deal closed in 2016, Lore signed a five-year deal to run Walmart's e-commerce division. I'm very excited to be at Walmart and have a lot of fun. We will continue to talk to you because I believe you are the most inventive man in retail today. Walmart shut down Jet.com in May, but it had already added a whole new branch of online sellers to its marketplace.

Walmart CEO Doug McMillon says he would buy it all again. If you look at the trajectory of our business, it changed when we made that acquisition and we were able to attract brands to Walmart.com: S'well, R ay-Ban and Champion. Historically, Walmart.com did not sell items from third-party vendors, but since the acquisition of Jet.com, the number of products sold on Walmart.com has increased by up to 10 times and the number of sellers on its site has doubled. in the past year. Then they started attracting more brands. They restructured their website to be more streamlined, more intuitive, and easier to use.

And last year, Walmart partnered with Advance Auto Parts. Walmart wasn't going to be a 100,000 SKU auto parts retailer on its own. They achieve that with Advance Auto. This is probably the largest third-party relationship any online retailer has with a brick-and-mortar retailer. And in an effort to reach a new type of customer, Lore led the purchase of several specialty apparel companies such as Bonobos, ModCloth and Eloquii, although some have since been sold again. A large portion of Walmart store customers are low to middle income. I think what they tried to do here and through the Jet.com brand was continue to move upmarket and look for more profitable customers, the urban millennials.

And then they also introduced the Jetblack service, which is an exclusive personal shopping service. For a large fee, Jetblack allowed New York Walmart customers to text orders to personal shoppers for home delivery. But Walmart shut it down in February after it only had about 600 active members. If we think about the dynamics of the very, very rich and wealthy today, I don't know that Walmart is necessarily the company that houses a brand like that. But in June, Walmart took a new turn and announced a major partnership with Shopify. Shopify, often known as the king of mom-and-pop retailers, helps more than 1.4 million small businesses run their online stores.

Now, these small businesses have a channel to try to sell on Walmart.com. For now, Walmart says it will add 1,200 top Shopify merchants to its site in 2020. Walmart wants a curated assortment on the website. I mean, Amazon has a very wide-ranging third-party business, and that comes with some risk. The partnership with Shopify is really important, I think it's very strategic. And I think it's an attempt to get those third-party sellers away from Amazon. There has been a lot of tension between third-party sellers and Amazon. On July 29, Jeff Bezos testified before Congress for the first time in Amazon's 26-year history, partly in response to questions about his reported use of data from third-party sellers to develop Amazon's own competing products.

The House Judiciary Committee is investigating whether Amazon, along with Apple, Facebook and Google, should be governed by stricter antitrust laws. Why should a third party list your product on Amazon if they will simply be harmed by your Amazon educational product as a result of the data you provide? I think what I want you to understand, and I think it's important to understand, is that we have a policy against using individual seller data to compete with our white label product. Ms. Jayapal cannot be assured that that policy is not routinely violated. While Amazon is struggling to maintain the trust of its third-party sellers, Walmart still has a long way to go if it wants to reach the millions of third-party sellers who account for more than half of Amazon's sales.

Walmart's market is much smaller, so you could, quote, crush it on page one of Walmart and still not get as many sales. Still, Walmart has one big and lasting advantage over Amazon: its 11,500 stores around the world. If you're a third-party seller, for example, if you can get into Walmart, you'll crush any sales you're making on Amazon. For sellers choosing where to reach customers, stores are a huge advantage and are much more scalable. So this diet pill company I worked for had 30 different products that we sold on Amazon. I threw a bunch of them. We took their sales from one million to three million.

And I thought that was the best thing in the world. But that was nothing, because I saw purchase orders on my desk for Walmart physical stores, for Walmart stores, there would be like two million dollars just for one region of the United States. Walmart stores also help keep costs down in the most expensive area of ​​online retail: shipping. If you can take advantage of those stores as fulfillment centers, I mean, if I'm going to buy something and I'm in the Philadelphia area, let it come from the store that's three blocks from my house instead of Virginia, you know, the price.

Points go down and speed goes up. Amazon has been spending heavily to try to control the costly shipping process, but its 175 fulfillment centers and its own network of planes, trucks and contracted delivery drivers are nowhere near the reach of Walmart's 4,700 stores that allow its trucks and drivers. travel a fraction of the distance. Walmart had the advantage of getting the product from the distribution center to the store, and then the consumer takes care of the last mile of much of it. Walmart uses its stores as product distribution centers, but it also has its own warehouse network without a front store.

Walmart remains dominant in another sector that relies heavily on brick-and-mortar stores: groceries. We are not very densely populated, so it is difficult to service, in an e-commerce model, supermarkets. So what that means is that Amazon is really at a disadvantage relative to Walmart. They have stores within 90 percent of the United States population. Grocery sales account for more than half of Walmart's U.S. revenue, making Walmart the largest grocery store in the country. Walmart has been selling groceries directly to customers since the '80s, and online grocery sales are now driving Walmart's overall online sales. The percentage of all U.S. grocery sales made online is expected to double from 20 percent in 2019 to 35 to 40 percent this year and next.

He finds his grocery vendor and tends to stick with him. It also gets a trove of data from grocery customers about their preferences. And you can use that data, and I think Walmart will use that data, to sell them other things. I think Walmart is going to win this grocery battle against Amazon. When Amazon bought Whole Foods for $13.7 billion in 2017, it was a clear move to compete with Walmart. But with about 475 stores, Whole Foods has about a tenth of the locations Walmart has in the United States. You can't find a traditional segment more difficult to enter than food.

You have to manage a million sellers, the products are hard, the meat is tough. And they chose to get into that business. They are still learning. Then in 2019, a month after Amazon announced free two-hour grocery deliveryFor Prime members in 2,000 regions, Walmart announced a membership program that offered unlimited grocery deliveries from 1,400 stores. It costs $12.95 a month or the same $98 annual fee as the new Walmart Plus membership. Or for an extra $7 a month, Walmart will deliver groceries right to your refrigerator in a handful of cities. Digital food is the next big e-commerce battleground. It is a trillion-dollar retail category that is the most underpenetrated online category today.

So, as it continues to grow at enormous rates, there are tens of billions of dollars at stake. In a survey conducted before the pandemic, about 39 percent of American consumers reported having purchased groceries online at least once. In May, that figure was almost 80 percent. But how many people will go back to conventional shopping or how many people will continue to buy their essentials online because they can? While the pandemic has increased the importance of fast grocery delivery, Walmart has an even faster and more cost-effective option: curbside pickup. When you arrive, they put it in the car and you're gone.

That's a big gun. While this is an option at Whole Foods stores, customers must wait for regular Amazon.com purchases to be delivered. In July, Prosper Analytics found that 62 percent of adults are shopping less in stores. So as the pandemic pushes so many people to shop online, Walmart's name recognition among older shoppers is also a plus. My parents, for example, aren't the strongest online shoppers, but when this pandemic hit, they had no choice. But they've been to a Walmart before. When you are forced to buy things online, you will go with those you know and trust.

Walmart hired 200,000 employees during the pandemic to help clean stores and keep items in stock. It is giving a third round of bonuses to hourly employees working during the pandemic for a total of $1.1 billion in bonuses this year, while facing a backlash from sick and dying workers. Now, for the first time in 30 years, Walmart will be closed on Thanksgiving Day. It is also eliminating some corporate roles as it merges its online and in-store businesses. Meanwhile, Amazon postponed its annual Prime Day event that normally sets sales records in July. It offered one-time bonuses to frontline workers totaling $500 million and gave workers a $2-an-hour raise from March to May.

It hired 175,000 workers to meet demand during the pandemic, but faced backlash for keeping all of its warehouses operational despite worker deaths. Still in the second quarter of 2012, Amazon's first-party sales were up 48 percent year over year, and third-party sales were up 52 percent. Walmart's online sales were up 74 percent in the first quarter of 2020. I mean, you could argue during the pandemic that Walmart got a little bit of a head start because it hasn't publicly had delivery delays, product delays to the consumer, which Amazon has had. When I started reporting on the pandemic in March, I discovered that Amazon was actually trying to get shoppers to buy less.

Fewer non-essential orders meant they could focus on shipping things like hand sanitizer and masks to hospitals and state agencies. That's when I decided to try Walmart. My last order from Amazon was in February, before they suffered many of those shipping delays caused by supply chain issues and such a large increase in demand. When I was staying at home, I decided to buy my groceries at Walmart and they usually arrived the same day or the next day. When I ordered other items from Walmart.com, they always arrived within the delivery time and I never had any delays.

In San Francisco, sometimes they even came the next day. They still don't come close to Amazon when it comes to the selection of items you can get online and arrive at your house in a day or two. So I think now Walmart and Amazon are locked in a steel cage fight to the death to become the country's everything store. So what does Walmart have planned as it continues to try to

catch

up with Amazon in e-commerce? For example, Walmart launched its own voice assistant called Ask Sam in July for employees to use to help shoppers find products and prices in stores.

They're trying to find ways to use those physical stores in new ways. Not just distribution, but also, you know, they're talking about medical, financial, edge computing and all these other things that really leverage the stores. For now, the launch of Walmart Plus has analysts hopeful that it may one day at least offer a second option for Amazon customers to turn to. Amazon has set a high bar, but it has also given people the manual to follow. And then once you figure out how to integrate online into your stores, you'll get immense returns for brick-and-mortar as well.