Wal-Mart's Competition with Amazon

1062 words (4 pages) Business Assignment

12th Jun 2020 Business Assignment Reference this

Tags: Business AssignmentsBusinessAmazonWalmartBusiness Models

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Introduction

Wal-Mart is a multinational retail corporation that operates discount department stores and grocery stores. Headquartered in Bentonville, Arkansas, the company was founded by Sam Walton in 1962 and incorporated in 1969. Wal-Mart successfully created a buying pattern that simultaneously increased its sales and suited its customers’ needs. It sells everything under one roof. Customers could walk in for one item and walk out with a dozen items they didn’t know they wanted.

Amazon is a multinational technology company that focuses on e-commerce, cloud computing, digital streaming, and artificial intelligence. Based in Seattle, Washington, the company was founded by Jeff Bezos in 1995.Amazon has taken Walmart’s model of selling everything under one roof and adopted it for the digital world we live in now.

Evolution of Business Models

Walmart has changed over the last few years.  The threat of Amazon and the popularity of online shopping means that customers no longer have to visit a store for common everyday items.  To keep up with consumer habits, Walmart began to repurpose its stores. This move helped the company clean up stores, eliminate out of stocks, and improved customer service.  Another business change was Walmart’s acquisition of Jet.com and making its founder Marc Lore head of U.S. e-commerce operation (Rita, 2018).  With the help of Lore, innovations like online grocery pick up, expansion of inventory on the company’s website, and free two-day shipping, has commerce sales soaring.

When Amazon launched in 1995, the company’s whole purpose was selling books. In 1998, Amazon extended beyond books and started selling music CDs, and by the following year, it had added more product categories, such as toys, electronics, and tools. Amazon is now the leader in keeping up with consumer habits (Mourdoukoutas, 2019).  Mostly by creating habits they didn’t even know they would need like Amazon Prime and suggestive selling. By doing this, they have to stay accessible at all times. Amazon’s move to open brick and mortar stores reflect keeping up with a new trend, the merging of online and offline retailing (Mourdoukoutas, 2019). This will also help in expedient of shipping or pick up places for local shoppers.

Comparative Advantages

Walmart and Amazon have comparative advantages against each other that go hand and hand. Walmart has a brick and mortar dominance. Roughly 90% of the U.S. population is within 10 miles of a Walmart store (Levy, 2017). That means Wal-Mart has a big advantage in the in-store pickup and online grocery ordering and has the infrastructure to succeed in shipping items to customers’ homes. Amazon has an online dominance. Everything you can get in store at Wal-Mart, you can purchase online from Amazon with plenty of price points to choose from. It has a cost edge over Wal-Mart because it does not have to manage as many physical stores.

Wal-Mart is likely to dominate the growing online market for perishables.  They already have the infrastructure to do it. Meanwhile, Amazon is just now getting its feet wet with physical stores.  After purchasing Whole Foods Market, Amazon’s physical storefronts still only amount to about 10% of Wal-Mart’s. Even with its network of fulfillment centers, just 44% of the population lived within 20 miles of Amazon’s network (Levy, 2017).

Business Strategies

A Business strategy is a company’s working plan for achieving its vision, prioritizing objectives, competing successfully, and optimizing financial performance with its business model.  According to Anne Zybowski, Kantar research Vice President of retail insights, has some advice on what Wal-Mart’s business strategy path should look like.

“Walmart must make sure it’s web offerings extend outside the grocery aisles. It’s not one item at a time, it’s who wins the entire basket or shopping cart of consumables.  A big piece of the basket is groceries, but there’s also health and beauty care for example (O’Connor, 2013).”

Zybowski’s overall conclusion is, “The challenge now is to get people thinking of Walmart as a low-price leader on and offline (O’Connor, 2013).

Wal-Mart’s top priority in order to win the “battle for e-commerce supremacy” is to do exactly what Anne Zybowski suggests, get people thinking of Walmart on and offline.  The brink & mortal presence has to be transformed into an online gallery for all ages.  If you combine easy accessibility with the fastest delivery, that is the perfect combination for a winner.  The most recent business model changes are putting Walmart in a position to win.

Conclusion

Amazon and Walmart both have undeniable strengths in online grocery, and their prospects for the future are bright. They expect to be #1 in every venture that they enter into. Part of this is due to their business model, and part is due to their extreme focus on being the best. There is room in the market for two online grocers, but it’s clear that both will continue battling until one winner stands clearly on top.

References

  1. Levy, A. (2017, September 28). Wal-Mart’s biggest advantage over Amazon. Retrieved from
  1. https://www.fool.com/investing/2017/09/28/wal-marts-biggest-advantage-over-amazon.aspx
  2. Mourdoukoutas, P. (2019, March 3). Amazon and Tesla change business models. Retrieved             from https://www.forbes.com/sites/forbes-finds/2019/06/04/beds-with-storage-for-your-small    space/ #581ea27d6385
  3. O’Connor, C. (2013, April 23). Wal-Mart vs. Amazon: World’s biggest e-commerce battle could boil down to vegetables. Retrieved from https://www.forbes.com/sites/clareoconnor/2013/04/23/ wal-mart-vs-amazon-worlds-biggest-e-commerce-battle-could-boil-down-to-vegetables/#1589663f3154
  4. Riva, A. (2018, August). Walmart vs. Amazon: Who will win the online grocery war?   Retrieved from https://www.onespace.com/blog/2018/08/walmart-vs-amazon-will-win-online-grocery-war/

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