Walmart Aims To Help Customers Save Money. Amazon Helps Them Save Time. And It's Winning

For many people, time is as valuable - and for some, maybe more - as money. Even for those who are struggling financially no longer find Walmart to be such a great bargain.

The irony is that some, possibly much, of that economic decline is thanks to Walmart's relentless focus on reducing prices, which meant by extension, reducing labor costs. Amazon is not exactly a friend of the working class, but strategically, it's focus on time has helped it keep costs even lower while enhancing convenience.

The result has been devastating to retail, even to Walmart, which is now attempting to copy Amazon's formula. The issue is whether, even with its size and power, Amazon has too great a lead.  JL

The Economist reports:

Walmart’s share of America’s retail sales, which stands at 10.6%, is still more than twice Amazon’s, but it peaked in 2009 at nearly 12%. Walmart has strived to help Americans save money, Amazon is obsessed with helping them save time. In the age of Amazon only those that offer better service, greater convenience or an experience that is hard to mimic online will do well.
FOR decades a titan has towered over America’s shopping landscape. Walmart is not just the world’s biggest retailer but the biggest private employer and, by sales, the biggest company. Last year its tills rang up takings of $482 billion, about twice Apple’s revenue. But now the beast of Bentonville must cope with an unfamiliar sensation. After ruling as the undisputed disrupter of American retailing, Walmart finds itself being disrupted.
The source of the commotion is online shopping, specifically online shopping at Amazon. E-commerce accounted for $1 in every $10 that American shoppers spent last year, up by 15% from 2014. Amazon’s North American sales grew at about twice that rate. Walmart’s share of America’s retail sales, which stands at 10.6%, is still more than twice Amazon’s, but it peaked in 2009 at nearly 12%. In January Walmart said it would close 154 American stores. It may need to shut more. Walmart’s “supercentres” once offered an unmatched combination of squeezed prices and expansive choice, but this formula is losing its magic (see article). Discounters and other competitors are rivalling Walmart’s low prices at the same time as Amazon’s warehouses can beat its range.Amazon is also offering something different. Whereas Walmart has strived to help Americans save money, Amazon is obsessed with helping them save time. Amazon has become a new kind of big-box retailer, with warehouses placed strategically around America to speed deliveries to customers. Innovations such as Dash, which lets you press a button in your kitchen to order soap or coffee, could turn Amazon from an online store into something like a utility.
Walmart is fighting back. It is spending billions in the hope of growing even larger. It is offering more goods to more customers, in stores and online. With its legendary attention to detail, it is making its operations even more efficient. For instance, it will save more than 35 truckloads of buttercream icing this year, after spotting that its bakers were leaving too much icing in the bottom of their tubs. By using 27 different boxes rather than 12 to deliver online goods, the firm reckons it can save 7.2m cubic feet of cardboard boxes a year.
Last month sunny results sent up its share price by 10%. Yet far from offering comfort to other retailers hoping to knit together physical and online businesses, Walmart’s fightback shows how hard it will be for them to repel Amazon.
Other retailers cannot rival Walmart’s size—still its most potent weapon. Nine out of ten Americans live within ten miles of a store owned by Walmart. That gives it a unique advantage in e-commerce, because it can both ship from its stores and let consumers pick up baskets of goods that they ordered online. Its vast grocery business, which is harder to move online than non-perishable goods, provides further protection. Although investments have squeezed Walmart’s profits, the firm can afford to invest more than any other in information technology.

Space race

For smaller, worse-managed firms selling clothing, shoes and so on, the prognosis is bleaker. Since April 1st shares in some of America’s most famous retailers, including Macy’s, Gap and J.C. Penney, have plunged by more than 25%, in part because of the march of online firms. In the age of Amazon only those that offer better service, greater convenience or an experience that is hard to mimic online will do well. TJX, which offers brand-name goods at a discount, is thriving, because customers prefer hunting for treasures that are physically there in front of them. Customers come to Nike’s shops not just for trainers but for running clubs. Walmart is betting that it has the brawn and the brains to be in this group. However, others have less cause for hope.