Amazon and Walmart are two of the leading companies in the retail market. Walmart’s success has been as a result of innovation in its supply chain that has led to efficiencies in the distribution of their products. The two rivals have engaged in competition as they each strive to become the dominant player in the retail sector. Amazon and Walmart strategies for success is acquisition of smaller firms. For Amzon they acquired: whole foods, the biggest organic grocery store in America , Pill Pack, a pharmaceutical company that makes it easier to order and receive life saving medication and Ring, to expand into the home security and surveillance business. Walmart acquired Jet.com to grow their e commerce customer base. They also purchased Shoebuy, Bonobos, Moosejaw and Parcel so as to venture into the beauty and apparel industry.
Amazon has made a number of significant mistakes in its bid to become the number one retail market in America. Their flagship phone, Amazon fire, managed to sell less than fifty thousand units worldwide and were forced to discontinue its phone after dismal sales. For Walmart’s acquisition of Jet.com for three billion dollars was overvalued since it was a startup company that had only been around for a couple of years. It may fall short to Walmart’s ambitious expectations in the e commerce sector. Amazon is highly favored to win in this competition as they have a foothold in the online retail sector whilst Walmart is transitioning from brick and mortar stores to online sales.
Amazon is an American electronic commerce and cloud computing company based in Seattle, Washington, that was founded by Jeff Bezos on July 5, 1994. The tech giant is the largest Internet retailer in the world as measured by revenue and market capitalization, and second largest after Alibaba Group in terms of total sales. Amazon is dominating the online retail space with control of a staggering 44% of all US e-commerce sales in 2017. Amazon has created over 1.7 million direct and indirect jobs around the world. In 2017 alone, Amazon directly created more than 130,000 new Amazon jobs, not including acquisitions, bringing the global employee base to over 560,000. In 2017 Amazon shipped more than five billion items with Prime worldwide.
Walmart Inc is an American multinational retail corporation that operates a chain of hypermarkets, discount department stores, and grocery stores with the Headquarters in Bentonville, Arkansas. The company was founded by Sam Walton in 1962. Walmart has 11,718 stores and clubs in 28 countries. It is the world’s largest company by revenue – over US$500 billion according to Fortune Global 500 list in 2018 – as well as the largest private employer in the world with 2.3 million employees. It is a publicly traded family-owned business, as the company is controlled by the Walton family. Walmart was the largest U.S. grocery retailer in 2016, and 62.3 percent of Walmart’s US$478.614 billion sales came from U.S. operations. In fact, the author of the Walmart Effect, Mr. Charles Fishman, has noted that the company is 2% of the United States economy, all by itself. The nature or basis of the competitive rivalry; Amazon and Walmart are in the retail sector. The retail sector has its components. You have clothing and apparel, groceries, electronics, pharmaceuticals and beauty and fashion. To this this end there have been intense competition.
Walmart has dominated the industry for decades becoming one of the largest retail companies in the world. They accomplished this by establishing an efficient and complex logistics system. With seventy percent of all US freight transported by trucks, Walmart has cut down on costs by using their own trucks and trailers to deliver goods from the warehouses to their stores. This has translated to low prices for goods sold in Walmart locations. Recently, Amazon has dominated the e commerce side of retail shopping than Walmart. It does seem like Amazon has more momentum. Amazon’s market share is rising as more and more consumers switch to ecommerce. But. it also seems like it would be easier for Walmart to expand its online business than for Amazon to expand its presence in physical stores. Key strategy successes of each company or group of companies; For Amazon, their success has been as a result of their strategy to not have physical retail stores. The company uses the capital they have saved to invest in research and development.
The innovation in their logistic sector
In the past 20 years, Amazon‘s operating strategy has shifted from online retailer to B2B service provider, offering a stack of critical infrastructure as a service to other businesses. The Amazon prime membership that offers free two-day shipping has been a marketing success. Amazon Prime now has a hundred million subscribers. They leverage technology to broaden margins. An example is the use of thousands of robots at their warehouses to improve efficiency. Amazon’s cloud business, Amazon Web Services, has been the clear growth engine for Amazon in recent years. Now on pace to generate almost $25 billion in revenue over the next 12 months, AWS continues to be the backbone of Amazon’s expansion. Over 300,000 U.S.-based small and medium-sized businesses SMBs started selling on Amazon in 2017buying up an online pharmacy start-up called PillPack for $1 billion, which will give it pharmaceutical licenses in almost every state once the deal closes. That sped up its process to get to market by years and gave it an opportunity to generate billions in revenues by targeting those who pay cash for their meds before moving into the more complex insured market down the line.
Amazon also purchased ring, a smart-doorbell maker that streams audio and video to cellphones for about a billion dollars. They want to expand into the home security and surveillance business. It made this acquisition to solve the problem of widespread theft of delivery packages that customers complain about. But a lot of customers are hesitant and are wary of a company having access to one’s house at any time. Also, the data they collect through audio and video streaming raises a lot of privacy concerns. While Amazon’s ad business is still tiny compared to Google and Facebook, which collectively account for more than half of the digital advertising market, it’s on track to become the third largest ad player in the U.S. by 2020,Walmart has acquired Jet.com in August 2016, Shoebuy in January 2017, Moosejaw in February 2017, Modcloth in March 2017, Bonobos in June 2017, and Parcel in September 2017.Jet.com is an online retailer offering discounted prices on a wide variety of products, and its profits derive from annual subscription fees that members pay. Using algorithms, prices change in real time depending on the combination of products in the customer’s shopping cart.
Shoebuy, Inc. engages in the online retail of women, men, and kids’ footwear, apparel, bags, and accessories in the United States and internationally. The company was founded in 1999 and is based in Boston, Massachusetts. As of December 30, 2016, Shoebuy.com, Inc. operates as a subsidiary of Jet, Inc. edgy outdoor-gear company Moosejaw will be featured on Walmart’s website with its own, online destination. Purchased by Walmart in 2017. Moosejaw, like the other companies Walmart has acquired of late, targets millennial shoppers, which is something Walmart has said it wants to do more of, especially as that younger generation has greater spending power. Significant mistakes in each company’s or group of companies’ strategies; Walmart’s acquisition of Jet.com has not made a big impact in the online retail sector.
For Amazon, their foray into electronics was a failure as their flag ship phone, the Amazon fire phone, and their E-reader was not well received by the public. Its deal to sell its phones through the mobile service provider AT&T was not enough incentive to attract customers. There were a little over thirty five thousand fire phones that were sold before Amaozn discontinued the product. The reasons for its failure was its two hundred dollar price range for a 32 gigabit phone was the same price range for an Iphone 5 and Smasung Galaxy 5. Most customers assumed that the company would be a low end disruptor by selling the hardware at a low cost and profiting on the content. (Arthur)One weakness for Wal-Mart has been that its profit margins have dipped slightly due to more aggressive promotions. The retailer has been investing heavily to keep its prices competitive, and operating margins fell to 3.9 percent during the fiscal third quarter, from 4.4 percent a year ago.
Prediction on which company will emerge with a competitive advantage in the near future. Brick-and-mortar retailers are caught on the wrong side of the digital shift in retail, with many stuck in a dangerous cycle of falling foot traffic, declining comparable-store sales, and increasing store closures. an 8,600 brick-and-mortar stores will close their doors in 2017. For comparison, the report says 2,056 stores closed in 2016 and 5,077 were shuttered in 2015. The worst year on record is 2008, when 6,163 stores shut down.”Barely a quarter into 2017, year-to-date retail store closings have already surpassed those of 2008,” the report says. The company that will emerge with a competitive advantage in the near future is Amazon. This is because the world is moving towards ecommerce. Asian countries have adopted e-commerce in great numbers than in the US or Europe. One can see this through market capitalization of Alibaba which is the biggest online retailer in the world. Amazon recently reached a market capitalization of a trillion dollars. Amazon has a competitive advantage in that its marketplace is democratized thereby leading to hundreds of thousands of small and medium sized businesses conducting millions of dollars in sales through its website. Anyone can register for an Amazon sellers account for a fee of $40 membership fee.
Whereas Walmart hand picks its sellers and need to be able to meet their requirements. To qualify as a seller in Walmart one needs to be an already well-established business. This constraints Walmart not to include more people in.