Way To Go Walmart: Can It Acquire Amazon To Fight Alibaba?

Off-lately Walmart has been news for making one or other move of improving online sales-algorithms, acquiring tech-retail startups, aggressive-personalization strategies or making the offline shopping experience seamless.

There's no denying that Walmart's ultimate goal is to compete with the e-commerce behemoth Amazon by boosting online sales and hence, it has been investing heavily in making the in-store, mobile or desktop shopping experience, just the same.

Most certainly, there is no doubting on Walmart's reach and influence in the retail ecosystem. It has been the world's largest company (in revenues) with $485 billion in 2015- FY Jan 31, 2015 and has more than 11,000 stores in 27 countries. It has also been one of the biggest employers in the world with 2.2 million employees or associates. The company added $2.7 billion in net sales in the second quarter, despite an uncertain economic climate and an industry-wide decline in in-store sales.

During the last 20 years, from 1995 to 2014, Amazon has generated a combined revenues of $409 billion. In contrast, Walmart generated $486 billion in 2014 alone. Similarly, during the last 20 years, from 1995 to 2014, Amazon has generated a combined net profit of $1.96 billion. In contrast, Walmart generated $16.18 billion in 2014 alone. So, Walmart generated eight-times more net profit in 2014 than what Amazon could generate during the last 20 years.

Walmart's latest earnings report wasn't pretty. Overall revenue growth came in at a tepid 0.7 percent for the first half of the fiscal year. Its e-commerce sales grew 11.8 percent, but the total e-commerce market is tearing ahead at 15 percent quarterly growth, which means they're actively losing that market.

Oh, and it bought Jet.com, a massively unprofitable e-commerce vendor, for $3.3 billion to make up for it. So how did the market react? Walmart's stocks spiked 3 percent. I guess in today's retail market, you win by not losing!

But the too-little-too-late move by Walmart to acquire Jet.com is yet another signal that we are witnessing the downward spiral of the company. A world without Walmart is now not only possible, but likely, unless it makes some big moves soon. Not like Wal-Mart Express of course, some real ones!

Walmart's recent acquisition of Jet.com for US $3.3 billion (a competitor of Amazon.com) makes it clear that it knows that it can no longer afford to ignore the online-commerce space or carry its online functions in a dramatically subordinate way to its core business.

Considering its big e-commerce goals, Walmart's moves can be called wise. It is trying to align its brick-and-mortar business by using the online-data & adding personalization to the mix. If it is done right, customers will have a unique shopping experience on all its retail platforms.
The company is also impending to expedite same-day delivery as Amazon does and has tried to copy-cat the Amazon Prime strategy too by providing free shipping passes.

It's not very difficult to understand why investors value Amazon more than Walmart. It is because Walmart needs to make some fundamental changes. Right now e-commerce might represent only 3 per cent of total retail sales, but in 10 years, is anyone going to be driving five miles to a super center to buy toothpaste and shampoo?

Walmart has been selling online for the last 15 years but it doesn't know anything about you when you walk into one of its superstores. This needs to change!

Who's the Big Daddy of E-commerce?
The recent changes highlight Walmart's size, market and resources and the perspective it carries for its competitors. The two rivals have kept a close watch at each other's moves for years often following each other's footsteps in new ventures too. Like Amazon trailed into grocery space too, while Walmart presented itself to be the best one-stop-shop for grocery for years together in the physical market.

While these dukes fight for the throne in retail, they might just be missing on another conglomerate threat lurking in the shadows: 'Alibaba'. The Chinese e-commerce giant is determined to penetrate and go public in the US market very soon. It will essentially be partnering with a few Silicon-Valley Startups to grow in business; the recent example of this being its $10 million investment in popular messaging startup- 'SnapChat'. A series of such acquisitions in the near future will ensure its strong tech-hold in the e-commerce sector/online sales and also increase its global footprint. This could be a significant threat to Walmart, as this effort by the Chinese player could well be a forward-looking leap to end the dominance of the American giant in US.

What's On Wal-Mart's Mind?
Walmart's recent acquisition of Jet.com for US $3.3 billion (a competitor of Amazon.com) makes it clear that it knows that it can no longer afford to ignore the online-commerce space or carry its online functions in a dramatically subordinate way to its core business.

Well, the acquisition of Jet solves some key problems for Walmart such as giving a competitive advantage to it by offering lower prices than Amazon, by being a distributed market-space rather than holding its own inventory. It has also improved consumer insights to Walmart by being the tech-savvy arm, on the specific merchandise sale, the preferred basket-size and the kind of pocket-size of each customer. This is why Walmart's personalization strategy is so critical to glue all its channels together.

Walmart's changes are important because they underscore the need to meet customers on mobile, where there desire to engage in personalized content increases. We are likely to see other e-commerce players following the path, where Walmart has been taking the lead. It will mean that customers can count on Walmart for anything and everything. More importantly, Walmart can continue to grow without sacrificing quality of experience or brand equity.

Standing from outside, Walmart's strategy is undeniably good to compete with Amazon but if it wants to keep its vision wider, it needs to expand its ambition of competing with Alibaba. Only time will tell how the retail ecosystem transforms once Alibaba enters the scene in full-force but Walmart is off to a great start by focusing its resources on innovative technologies and strategies.

So here's the billion dollar question:

Will they build or win the war by shaking each-other's hands?
At present, Amazon and Walmart are in a dead heat of competition when it comes to supply chain expertise. Walmart is the chart-buster and has arguably the best network and physical infrastructure in the retail, while Amazon is the undisputable king in online-retail space. Right now, each company has something that the other doesn't have and want to build a total package.

However, Walmart's e-commerce business has a long way to go to before it even comes close to Amazon. The e-commerce giant has nearly 2 million third-party merchants, which offer close to 365 million products online, greatly outnumbering those on Walmart market place. There is also a longer vetting process for Walmart merchants than for those on other platforms. On average, it takes six weeks for Walmart to accept a third-party vendor, compared to only one day for competitors Amazon and eBay.

Will Amazon be able to build a massive distribution network and physical stores that beat Walmart before it can add major digital capabilities to its own supply chain and fuse it with its stores? Well, in future it is quite possible that Walmart can think about acquiring Amazon according to some industry experts, as it always easier to negotiate than to build.

I believe this battle of the titans will be won by one who can serves the customer exactly the way they want to be served. And that can happen only if they take new customer data and use it in the supply chain.

Another way we can see this battle going is if the players claim a new turf and dominate it. When the opponent is of equal strength and capability, it is imperative for one of these two competitors to change the battlefield. Some potential war zones can be mobiles, augmented reality and virtual reality.

More niche retailers like Lowe's and Wayfair are rapidly moving to augmented and virtual reality and if Walmart and Amazon also plan to compete in these verticals, they'll have to innovate constantly to retain their market share in the long term. The massive willingness and innovation push to make efforts to transform can alone bring Walmart or Amazon at the top.

After all we are talking about the rise of automation in the fast-food, grocery and retail sector. Walmart recently patented a system of self-driving shopping carts with mini robots that can complete a long list of duties once reserved for human employees.

However, Walmart's e-commerce business has a long way to go to before it even comes close to Amazon. The e-commerce giant has nearly 2 million third-party merchants, which offer close to 365 million products online, greatly outnumbering those on Walmart Marketplace. There is also a longer vetting process for Walmart merchants than for those on other platforms. On average, it takes six weeks for Walmart to accept a third-party vendor, compared to only one day for competitors Amazon and eBay. Walmart needs to start orienting itself around a future in which e-commerce will become the dominant retail channel. It needs to start learning who its customers are?!

Disclaimer: The views represented in the above article are based on the business trends & observations and not necessarily driven by any specific announcement.