If you can’t beat them, join them.
The famous idiom seems to go both directions when it comes to defining who is ahead in the retail game. Is it Amazon or Walmart? Who is the ruler of the online shopping wars? Amazon products are now displayed next to the organic celery. Walmart has become a much bigger player in the digital retail market.
At the start of 2017, Walmart had a market cap of $206 billion, with Amazon on the same day at $380 billion. Both companies saw tremendous growth last year, ending 2017 with $294 billion and $563 billion, respectively. While these numbers seem to favor Amazon as the big winner of the year, the growth rates are not that much different. Walmart’s 43% growth trails just behind Amazon’s 48%.
While Walmart still holds the number one position in retail as 2017’s world’s largest retailer, Amazon is firmly the largest online retailer.
But they aren’t far behind each other on those rankings. According to the National Retail Federation, Amazon is the tenth largest retailer in the world. Walmart is the fourth largest in world e-retailers.
How are they closing the gap on each other in competing to be number one in both categories? Both companies welcomed many new changes in 2017. These range from free shipping, product expansion, price wars. There’s also new physical locations to elevate shopping experiences.
For a long time, Amazon has found loyalty in online shoppers with its Prime customers. They pay an annual fee of $99 and receive free two-day shipping. Larger cities have the option of free same-day shipping. Walmart stepped up its online shopping game in February of 2017 as well. They also free two-day shipping on eligible orders of $35 and above. Walmart shoppers do not have to pay a membership fee.
Prime offers other benefits to their Prime customers such as streaming music and videos. Walmart’s similarly structured two-day shipping program is a better bargain as it has no price tag. This is a better fit for the less internet-savvy consumer. They are more concerned with affordable and fast shipping than versus the various e-perks of Amazon Prime.
Product Expansion and Price Wars
By the holiday shopping season last year, Walmart tripled the number of items on Walmart.com to reach more than 70 million SKUs. Much of that growth stems from unique relationships with well-known brands. By contrast, third party vendors account for nearly half of Amazon’s revenues. Amazon began cutting prices of products listed on its platform by third-party sellers. The “discount provided by Amazon” applied to products like board games and technological gadgets offered by other merchants. This was an effort to draw online shoppers away from Walmart during the holiday season. Selling products at lower prices would edge out Walmart, while still giving full price to the sellers. Amazon also made headlines with the price slashes at Whole Foods’ nearly 400 stores.
Walmart has been known as the best retailer of low-cost household goods, clothing, appliances and electronics. They elevated their online shopping with the acquisition of Jet.com. Walmart’s growth of its Marketplace of third-party vendors will help to propel Walmart even higher into the e-commerce battle. The Marketplace platform not only offers sales commissions to Walmart, but also a unique advertising opportunity. This expansion is still in its early stages and has more room for growth going forward. 2018 will be an interesting year to observe in terms of product offerings from both Amazon and Walmart.
Physical Locations versus Expanded Online Presence
With Amazon’s purchase of Whole Foods and the opening of a dozen Amazon Books stores, they are moving onto Walmart’s physical turf. Whole Foods’ number of stores pale in comparison with Walmart’s. Amazon’s expansion into physical locations is balancing the scales as Amazon works to become a true leader in the world’s physical retail marketplace.
But Walmart is quickly rising in digital sales with the purchases of Jet.com and ModCloth, Bonobos and Moosejaw. And with Walmart’s online shopping platform revamp, new shipping program and expanded online assortment, the mega-retailer boasted a 60% increase in online sales in 2017.
Walmart Changes the Game
Clearly, new rules need to be written. Last year, Walmart created “Store No 8,” an innovation hub meant to “redefine retail.” Store No 8 was named after an Arkansas location where Walmart founder Sam Walton was known to experiment. Meant to transform the world of commerce, the startup incubator put out an open call for companies in the VR space to pitch their best ideas for virtual reality that could transform the world of commerce. Five companies were selected to incubate for a period of eight to 12 weeks with support from Walmart.
The selected companies received capital to fund development costs and strategic advice during incubation of the concept, along with an opportunity to work with Walmart and its exclusive retail partners of Jet.com, Thrive Global and others. The project culminated in an invitation-only exhibition of select solutions in Los Angeles in October. It drew an exclusive group of high-tech brands, technologists and venture capitalists to debut the latest in Virtual Reality shopping. Walmart’s plan for Store No 8 to invest in these businesses like a venture capital fund will grow the group of entrepreneurs as a portfolio and hope to change the course of retail in the next decade.
Who Will Win in 2018
Both Walmart and Amazon will continue to compete for the number one spot of the largest online retailer. Amazon will succeed in strengthening its brand by opening more physical locations and promoting online products in their physical Whole Foods and Amazon Books stores. Walmart will grow its Marketplace online and find new solutions for its online shoppers to try and edge out Amazon. With forward thinking start-up divisions of Walmart like Store No 8, just might redefine the parameters of what online shopping can mean. No matter what, we can expect to see both retail giants offer more and more products. The ultimate winner seems to be, the shoppers.