When Amazon started selling more
than just books in the
late 1990s, it suddenly entered
into a rivalry with
the biggest name in retail.
Always low prices,
always Walmart.
Walmart has been at the
helm 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 U.S.
stores. The staggering size of
Walmart kind of escapes
people. It's the largest corporation
in the world in
terms of revenue. Yet when
it comes to e-commerce,
Amazon is the clear leader,
with 38.7 percent of the
market share compared to
Walmart's 5.3 percent.
And with the global
pandemic shifting shopper's
behavior for good, dominance in
online shopping is now
paramount. So if you're that
second site, you got to
be really good. You don't have
to be as good as
Amazon, because no one
will get there.
That's utopia. In perhaps
its clearest competitive
move against Amazon to date,
Walmart is now launching
Walmart Plus. The membership program
is meant to rival
Amazon Prime, offering benefits
that can't be
replicated online.
These guys are toe-to-toe and
nobody wants to stop
swinging. Nobody wants
to back down.
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 trying
to 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.
From our data study, we found
that two thirds of people
that had already joined
our premium loyalty program
would join another one.
Although the landing page says
Walmart Plus is coming
soon, the pandemic delayed its
planned release in the
spring. Walmart stock surged
seven percent when it
looked like it would launch
in July, but that didn't
happen either. When Walmart
Plus is available, members
will likely pay $98
for benefits like unlimited
same-day delivery on groceries from
the 1,600 of its
4,700 plus stores that do
grocery delivery n ow.
When we did our data study,
81 percent of the consumers
joined Amazon Prime because
of faster free shipping.
Only two percent joined
because of grocery delivery.
So I think it's a
real opportunity to leverage what
they already have in groceries
and maybe what Prime
doesn't. And just this
week, Walmart announced a
partnership with Instacart,
testing out same-day
grocery delivery in four
markets across California and
Oklahoma. Other perks are
rumored to include early
access to sale events,
discounts at gas stations
outside of Walmarts and
Walmart-owned Sam's Club
stores and reserved parking
spots in store lots.
As you think about Prime, 150
million, why would you go
head to head with that? If
you take a unique approach,
which it sounds like Walmart
is doing, you might 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
greater than all of
Amazon's revenue. If you look
back at 2005 Prime had
one benefit, fast and
free shipping, two-day shipping,
which was like unheard of.
Fifteen years later, some 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 some
three million items,
two-hour grocery delivery in
2,000 plus cities, deals
and sales events like Prime
Day and access to Amazon's
entertainment branch, 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, w hat 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.
P rime members make up
about 65 percent of Amazon's
customers and the program has
a 95 percent renewal
rate after two years.
Walmart started chasing 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 default to free
one-day shipping just
like Prime.
Despite the launch of Walmart
Plus and free fast
shipping, Walmart still lacks
one big thing that
Amazon has - sheer
volume of inventory.
Walmart.com has about 50,000
vendors selling items
online, while Amazon
has 8.7 million.
That's why in 2016,
Walmart bought discount online
retailer Jet.com for
3.3 billion dollars.
The acquisition brought relationships
with a slew of
brands that were already
comfortable selling on
Jet.com .
They are on track to
more than quadruple their online
business since they
acquired Jet.
It was an uh-oh moment
for every other brick-and-mortar
retailer, because now the
biggest brick-and-mortar guy
is now, you know,
moving heavily online.
E-commerce is a scale game and
you want to get as much
leverage as you can
on your fixed infrastructure.
And as you get bigger, cost
of goods goes down and you
get more leverage. Marc Lore
spent two years at Amazon
before breaking off to start
Jet.com , working to
undercut prices from
the e-commerce megastores.
Walmart's purchase of Jet.com was
the big move that
brought it into the big
leagues of online shopping.
When the deal was made in
2016, Lore signed a five
year contract to run
Walmart's e-commerce division.
I'm so excited to be at
Walmart, having a lot of fun.
We're going to keep talking to
you because I think that
you're the most inventive
man in retail today.
Walmart shut down Jet.com in
May, but it had already
brought an entirely new branch
of online sellers onto
its marketplace. Walmart CEO
Doug McMillon says he
would buy it
all over again.
If you look at the
trajectory of our business, it
changed when we made that
acquisition and we've been
able to attract brands to
Walmart.com - S'well, R
ay-Ban and Champion.
Historically, Walmart.com didn't
sell things from
third-party vendors, but since
the Jet.com acquisition
the number of products sold
on Walmart.com has grown
up to 10 times higher, and
the number of sellers on
its site doubled just
in the last year.
So they started
attracting more brands.
They retooled their website to
be more streamlined and
more intuitive,
more user-friendly.
And last year, Walmart
partnered with Advance Auto
Parts. Walmart was not going to
be a 100,000 SKU auto
parts retailer on its own.
They get that
with Advance Auto.
This is probably the
largest third-party relationship
that any online retailer
has with a brick-and-mortar
retailer. And in an effort to
reach a new type of
customer, Lore spearheaded the
purchase of several
specialty apparel companies like
Bonobos, ModCloth and
Eloquii, a lthough some have
been sold again since.
A big portion of
Walmart store customers are
lower-to-middle-income. I think what
they tried to do
here and through the Jet.com
brand was to continue to
go up market and go
for more profitable customers,
urban millennials. And then
they also introduced the
service Jetblack, which is
an upscale 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 saw
about 600 active members.
If we think about the
dynamics of the very, very
affluent and wealthy today, I
don't know if Walmart is
necessarily the company to be
housing a brand like
that. But in June, Walmart
pivoted again, announcing a
major partnership
with Shopify.
Often referred to as
the king of mom-and
pop-retailers, Shopify helps more
than 1.4 million
small businesses run
their online stores.
Now, these small businesses have
a channel to try
selling on Walmart.com.
For now, Walmart says it's
adding 1,200 of Shopify's
top 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 with th
at comes some risk.
The partnership with Shopify
is really important, I
think it's very strategic.
And I do think it is
an attempt to pull away those
third-party sellers
on Amazon.
There has been kind of
a lot of tension between
third-party sellers
and Amazon.
On July 29th, Jeff Bezos
testified before Congress for
the first time in Amazon's
26 year history, partly in
response to questions about
reported use of
third-party seller data to
develop Amazon's own
competing products. The House
Judiciary Committee is
investigating whether Amazon,
along with Apple,
Facebook and Google, need to
be governed by stricter
antitrust laws.
Why should a third-party so
list their product on
Amazon if they're just going
to be undercut by
Amazon-own ed product as a
result of data you take
from them? 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
private label product.
You couldn’t assure Ms. Jayapal
that that policy isn’t
violated routinely.
While Amazon is battling to
keep the trust of its
third-party sellers, Walmart still has
a long way to
go if it wants to catch
up with the millions of
third-party sellers that make up
more than half of
Amazon's sales. The Walmart
marketplace is a lot
smaller, so you could be,
quote unquote, crushing it
on page one on Walmart
and you're still not getting
that many sales. Still, Walmart
has one big, long
standing advantage over Amazon,
its 11,500 global
stores. If you're a third-party
seller, like if you
can get into brick-and-mortar
Walmart, you're going to
crush whatever sales on
Amazon you're doing.
For sellers choosing where
to reach customers, stores
are a big bonus
and much more scalable.
So this diet pill company I
worked at, they had 30
different products that we
were selling on Amazon.
I launched a whole bunch
of them. We brought their
sales from one million
to three million.
And I thought that was like
the greatest thing in the
world. But that was nothing,
because I would see
purchase orders come across my
desk for the Walmart
brick and mortar side, for
the Walmart stores, there
would be like two million
dollars just for like one
region of the
United States.
Walmart stores also help keep
down its costs in the
most expensive area of
online retail - shipping.
If you can leverage those
stores as your fulfillment
centers, meaning if I'm
going to purchase something
and I'm in the Philadelphia
area, have it come from
the store that's three blocks
from my house as opposed
to Virginia , you know, price
points go down and speed
goes up. Amazon has been
spending wildly to try and
control the expensive shipping
process, but it's 175
fulfillment centers and own
network of planes, trucks
and contracted delivery drivers
don't come close to
the reach of Walmart's 4,700
stores that allow its
trucks and drivers to travel
a fraction of the
distance. Walmart had the
advantage of getting product
from distribution center to the
store, and then the
consumer handles the last mile
for a lot of it.
Walmart uses its stores
as distribution centers for
products, but also has its
own dedicated network of
warehouses without a
front-facing store.
Walmart remains dominant in
another sector that's
largely dependent on
brick-and-mortar stores -
groceries. We're not very
densely populated, and so
it's hard to service, in
an e-commerce model, grocery.
So what that means is that
Amazon is really at a
little bit of a
disadvantage relative to Walmart.
They have stores within 90
percent of the population
in the United States. Grocery
sales account for more
than half of Walmart's U.S.
revenue, making Walmart the
nation's biggest grocer.
Walmart's been selling groceries
directly to customers
since the 80's, and the
online sale of groceries is
now boosting Walmart's
overall online sales.
The percentage of all U.S.
grocery sales happening online is
set to double from
20 percent in 2019 to 35 to
40 percent this year a nd
next. You find your grocery
vendor and you tend to
stick with them. You also get
a treasure trove of data
from grocery customers
about their preferences.
A nd you can use that
dat a, and I believe Walmart
will use that data, to
sell them other things.
I think that Walmart is going
to win in this grocery
battle versus Amazon.
When Amazon bought Whole Foods
for 13.7 billion in
2017, it was a clear
move to compete with Walmart.
But with roughly 475 stores,
Whole Foods has about a
tenth of the locations as
Walmart does in the U.S.
You cannot find a
tougher brick-and-mortar segment to
get into than food.
You've got to manage a
million vendors, produce is
hard, meat is tough.
And they chose to
get into that business.
They're still learning. Then in
2019, a month after
Amazon announced free two-hour
grocery delivery for
Prime members in 2,000
regions, Walmart announced a
membership program offering
unlimited grocery
deliveries from
1,400 stores.
It costs $12.95 a month or
the same $98 annual fee of
the new Walmart
Plus membership.
Or for an extra seven
dollars a month, Walmart will
deliver groceries straight into
your fridge in a
handful of cities. Digital grocery
is the next big
battleground in e-commerce.
It's a one trillion dollar
retail category that is
today the least
penetrated category online.
So as it continues to grow
at outsize d rates, there
are tens of billions
of dollars at play.
In one survey before the
pandemic, about 39 percent of
U.S. consumers reported having
shopped online for
groceries at least once.
By May, that number
was nearly 80 percent.
But how many people are
going to go back to
conventional shopping or how many
people are going to
stay with buying their
staples online because they
can? While the pandemic boosted
the importance of fast
grocery delivery, Walmart has
an even faster, more
cost-effective option -
curbside pickup.
When you pull up, they put
it in the car and you're
gone. That's a big weapon.
While this is an option
at Whole Foods stores ,
customers need to wait
for regular Amazon.com
purchases to be delivered.
In July, Prosper Analytics found
that 62 percent of
adults are shopping
in stores less.
So as the pandemic pushes
so many online for their
shopping, Walmart's name
recognition with older
shoppers is also a plus.
My parents, as an example,
they're not the most robust
online shoppers, but when this
pandemic hit like they
had no choice. But they've
been to a Walmart before.
When forced to purchase things
online, you're going to
go with who you know
and who you trust.
Walmart hired 200,000 employees
during the pandemic to
help clean stores and
keep items in stock.
It's giving a third round
of bonuses to hourly
employees working during the pandemic
for a total of
1.1 billion dollars in bonuses
this year while facing
backlash for sick
and dying workers.
Now, for the first time in
30 years, Walmart will be
closed on Thanksgiving Day.
It's also cutting some corporate
roles as it merges
its online and
store businesses.
Amazon meanwhile, postponed its
annual Prime Day event
that usually sets sales
records in July.
It offered one-time bonuses
to front-line workers
totaling 500 million dollars and
gave workers a two
dollar-per-hour raise from
March to May.
It hired 175,000 workers to
keep up with demand during
the pandemic, but faced backlash
for keeping all 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,
with third-party sales
up 52 percent.
Walmart's online sales rose 74
percent in the first
quarter of 2020. I mean,
you could argue during the
pandemic that Walmart's taken a
bit of a lead because
they haven't publicly had
the delivery delays, the
product to the consumer delays,
that Amazon has had.
When I began reporting on
the pandemic in March, I
discovered that Amazon was
actually trying to get
shoppers to buy less.
Fewer nonessential orders meant
they could focus on
shipping things like hand
sanitizer and masks to
hospitals and
state agencies.
That's when I decided to
give Walmart a try.
My last order on Amazon
was back in February, which
was before they had a
lot of those shipping delays
that were caused by supply chain
issues and such a big
surge in demand. When I stayed
home, I decided to get
my groceries from Walmart and
they usually came the
same day or the next day.
When I ordered other items
on Walmart.com, they always
arrived within the delivery window
and I never had any
delays. In San Francisco, sometimes
they even came the
next day. They still don't
come anywhere close to
Amazon when it comes to
the selection of items that
you can get through online
and get to your house
within one or two days.
So I think right now Walmart
and Amazon are locked in
a steel cage death match
to become the country's
everything store. So what does
Walmart have planned as
it continues trying to
catch 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 and
financial and edge computing
and all of these other
things that really leverage the
stores. For now, the launch
of Walmart Plus has
analysts hopeful that one day
it could at least
provide a second option for
Amazon customers to turn
to. Amazon has set a very
high bar, but they've also
given people the playbook
to kind of follow.
And then once you figure
out how to integrate online
into your stores, there's
immense profitability as
well for the
brick-and-mortar guys.
