Viviane Simond, Express Trade Capital
Amazon and Walmart are vying to provide virtually every consumer good imaginable, and Amazon appears to be winning. Amazon is currently in the process of buying Whole foods for $13.4 billion. Since the news broke, Amazon’s market shares have remained stable while other large-scale retailers struggle to stay afloat. Walmart is no exception, their market capitalization dropped 5% immediately after Amazon announced their plans.
Walmart has been scrambling to diversify and keep up with the growing popularity of e-commerce. They recently purchased Bonobos, a high-end brand that sells dress shirts and other professional wardrobe staples, for $310 million. Despite having an initial disadvantage, Walmart’s persistence is paying off. Their online sales have grown 63% since last year, likely thanks to the retailer’s moves to harness third party appeal by buying brands like ModCloth and Shoebuy.com.
Meanwhile, Amazon is continuing to build a full-service industry with consistent new services like Prime Wardrobe, a fashion box from which customers may choose items to keep and return the rest, much like StitchFix. Amazon even has its own grocery service, known as “AmazonFresh,” but it’s yet to see much activity due to the logistical and financial issues surrounding perishable deliveries. Surprisingly, Walmart has the upper hand in this area…for now. The super-store currently has locations within ten miles of 90% of American shoppers and provides a delivery service allowing customers to place orders online and pick up in-store without waiting in line. Walmart’s niche dominance may shift, however, with Amazon’s upcoming acquisition of Whole Foods and the announcement of a series of brick and mortar locations.
Last year, Walmart attempted to catch up to Amazon when they purchased Jet.com for $3 billion. The investment is proving fruitful, but still brings in only a fraction of Amazon’s e-commerce revenues. Following Amazon’s announcement, Whole Food’s stock went up $9.62 per share and Amazon’s jumped $23.54 per share (2.4%). Unfortunately, other retailers saw the opposite effect. Walmart’s shares dropped by 4.7%, Target by 5%, Costco 7%, and Kroger 9%. Competing retailers are also concerned by Amazon’s plans to reduce Whole Foods’ prices and change inventory. Amazon hopes that this will help attract a wider customer base, but it may spell trouble for smaller businesses that can’t afford to compete.
Experts say that at this point, Walmart is one of the only retailers that directly competes with Amazon in terms of size, scale, and market value. Walmart has certainly made aggressive attempts at competition, consciously avoiding annual membership programs like Amazon Prime and insisting that their tech vendors not run applications through Amazon’s Web Service (AWS). Walmart has also been consistently acquiring new internet-based brands, focusing on product varieties Amazon lacks. Regardless of the future of Whole Foods, Walmart plans to continue expanding their product base to compete more effectively. Amazon has publicly condemned Walmart’s prohibition of AWS within their network, claiming that the restriction will hurt customers and tech companies alike.
Whatever happens next, it’s becoming clear that all retailers may fear Amazon’s influence before long. The e-commerce giant continues to grow and diversify its offerings and aggressively drive down prices, increasing competitors’ difficulty in keeping up.
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