Corporate Innovation: Walmart vs Amazon?
In this month's Corporate Innovation newsletter, we take a look at Walmart, the American retail Goliath and how it's responding to Amazon in the battle to be the number one retailer on the planet.
Founded as a five and dime store called Walton's in 1945, the company's early success was down to its discount store model. Founder Sam Walton believed (and proved) that selling for less meant selling more, and making more as a result. As the company expanded, it adopted the mechanism of mass distribution to offer products at lower prices.
Walmart now has over 11,700 stores in 28 countries, operating under 65 different names (for example Asda in the UK, the Seiyu Group in Japan and Best Price in India).
Still headquartered in Bentonville in Arkansas, the publicly-traded and family-owned business employs approximately 2.3 million staff, or “Associates” as they are known.
Its annual turnover is over US $500 billion, making it the world’s largest company by revenue according to the Fortune Global 500 list in 2018 and the world’s number one retaileraccording to the Forbes 2018 Global 2000 List. Originally a bricks and mortar business, the explosion of e-commerce has forced it to expand into the online space and adopt a more aggressive innovation strategy to retain its number one retailer ranking.
Key to Walmart’s success has been a policy of acquisitions. Starting as early as 1974 with the purchase of 16 stores in Michigan and Illinois, it's a strategy that continues to this day.
In recent years, the retail behemoth has been utilising its colossal financial clout to significantly increase its online holdings in various market sectors. In August 2016, it purchased Jet.com for US$ 3.3 billion in what was seen as a direct play for the lion’s share of the e-commerce space. Further acquisitions quickly followed in 2017 with the purchase of Moosejaw - a leading online active outdoor retailer, Bonobos - the men’s apparel company and Parcel - a technology-based, same-day and last-mile delivery company in Brooklyn. In 2018, it acquired a 77% controlling stake in Flipkart, the Indian online giant for a staggering $16 billion!
Competing with Amazon
Walmart’s biggest competitor is of course Amazon, the largest online retailer in the world(featured in our June Corporate Innovation newsletter). In a dramatic turn of events, Amazon surpassed Walmart in 2015 as the most valuable retailer in the US by market capitalisation.
In 2017, with the acquisition of Whole Foods Market for US$13.4 Billion, the online giant significantly increased its presence as a bricks and mortar retailer, in what was seen as a direct play for Walmart’s market share. For the captivated global observers, it was just the latest instalment of the rivals' ongoing battle for retail supremacy.
Walmart has been aggressively working at catching up with Amazon in the online space. It's been improving its distribution networks while relying on its existing physical infrastructure of almost 5,000 U.S stores to double up as as warehouses for e-commerce sales.
In 2016 Walmart improved its $49 per year Shipping Pass delivery service by reducing delivery times from three days to two, a direct attempt to rival Amazon Prime’s $99 per year service. By January 2017, the company upped the ante by scraping the two day subscription service in a further attempt to compete with Amazon, refunding those who had paid the subscription.
Recently, Walmart has teamed up with Alert Innovation to adopt a custom version of Alert’s Alphabot product-picking robots. With the goal of speeding up the picking process, the shuttle robots will be tested at the company's warehouse and superstore in New Hampshire. Amazon in contrast, already uses over 100,000 robots globally.
With the purchase of Parcel in 2017, Walmart acquired a technology based, same-day and last-mile delivery company specialising in perishable and non-perishable delivery to customers in New York City. And in Seattle, Walmart will begin delivering groceries ordered online to people in Seattle and its suburbs, challenging Amazon on its home ground in the grocery convenience business.
In January 2018, it was announced that Walmart will partner with Japanese retailer Rakuten to launch an online grocery delivery service in Japan, while also offering e-readers, e-books and audiobooks to American Walmart customers. A late push to rival Amazon.
It has even been reported that Walmart is looking at entering the subscription-video space, hoping to compete with Netflix and Amazon Video.
Whether Walmart manages to beat Amazon as the number one online retailer in the world, or if Amazon beats Walmart as the number one overall retailer in the world remains to be seen. For now, we continue to watch in awe as they battle it out with their wallets.
Walmart’s story is one that epitomises the American dream; a small five and dime store that went on to become the number one retailer in the world. It’s an inspiring story and a perfect example of corporate innovation.
A2D’s International Corporate Experiences Program has also been designed with a focus on corporate innovation. We fly executives from our client companies to meet with international organisations that are leading the way through innovation. A tailor-made program of meetings, brainstorming sessions and presentations by industry leaders educate and inspire our clients, whilst combining the best in corporate travel and entertainment.
If you would like to learn more about these unique corporate programs, please get in touch with us today.
I hope you’ve enjoyed our latest look at corporate innovation.
Founder & CEO, A2D Travel & Concierge