Amazon and Walmart E-Retail Comparisons

Amazon and Walmart E-retail Comparisons

Background: 

        Walmart is the well-established leader in brick and mortar discount department stores both in the United States and internationally. Since the emergence of the internet shopping craze, Amazon.com has established itself as the premier one-stop online shop for e-retail and is widely considered the industry leader. Customers who would have once visited a Walmart store for a shopping need are increasingly turning to online resources such as amazon.com. Walmart.com and Samsclub.com provide an online shopping experience for Walmart patrons, but Walmart is clearly second-tier to amazon.com in e-retail.

Key Findings:

• The US online retail market grew by 14.4% in 2014 and is currently valued at $298.3 billion. It is projected to exceed $561 billion by 2019 (Marketline, 2015). 
• In July 2015, Amazon bypassed Walmart to become the largest retailer by market value (Phillips, 2015).
• Amazon’s revenues from online sales in 2015 are expected to exceed $71.84 billion while Walmart’s e-retail revenues are expected to be closer to $13.1 billion (Wehba, 2015).
• Amazon pioneered services such as Amazon Marketplace, Amazon Prime, and Amazon Fresh, and it has fully integrated them into the online shopping experience. The annual Amazon Prime membership fee is $99 (Marketline, 2015).
• In 2015, Walmart invested $1.2 billion in its ecommerce business. New initiatives included an online shoppers club similar to Amazon Prime but for only a $50 annual subscription. (D'Onfro, 2015).
• Amazon’s innovative logistics system is based on efficiency to allow for, in some cases, same day delivery (SCIDigest Staff, 2015).

Recommendations:

The most telling metric to gauge Walmart’s ability to overtake Amazon in e-retail is the revenue produced through online sales for each company. Although the idea that Walmart can increase online revenues enough to supplant Amazon as the premier online retailer is unrealistically optimistic, there are key initiatives Walmart can pursue to increase its market share. Those key areas of initiative follow:

• Expand and fully implement our shopping club as an answer to Amazon Prime. This shopping club should highlight the cheaper membership price, and it should include offers such as special sales days for members.
• Provide a larger selection of products for online consumers. In order to compete with Amazon’s online offerings, we must offer a larger selection than strictly those items available in our supercenters.
• Institute a focused marketing campaign around Walmart’s online sales. The audience for this marketing campaign should be online shoppers as opposed to those who frequent Walmart stores. The campaigns should focus on Walmart.com as a separate, online entity instead of being a subset of a retail giant.
• Adjust our e-commerce business and logistical models to provide a more effective platform for business transactions as opposed to mirroring an online extension of a retail store.

Analysis:        

        Walmart is facing a number of challenges in our quest to close the gap between Amazon and us in the e-retail sector. First, Amazon is well-established as the premier “go-to” online retail store. In 2014, Amazon.com accounted for 22% of all online retail shopping site visits while we accounted for only 6% (Bitlander, 2014). This is indicative that customers trust the Amazon brand when shopping online. One possible reason for the disparity is that, as of April 2015, Walmart.com’s selection of products is equal to only 1.1% of the selection of products offered through Amazon (D'Onfro, 2015). The gap in products offered is a significant barrier in our ability to gain market share.

        Given the disparity in products available, it seems that, in the past, we have approached the e-retail sector as a mere extension of the brick and mortar retail business while Amazon has taken an entirely different business approach. 100% of Amazon’s sales are through online sales while they account for only 2.5% of Walmart’s revenue stream (D'Onfro, 2015). Walmart must make a fundamental shift in focus concerning a business model and logistical approaches to e-retail, and Amazon should be the example we should strive to emulate.