Online Retail and Services: Walmart and Amazon

Subject: E-Commerce
Pages: 8
Words: 2283
Reading time:
9 min
Study level: PhD

Introduction

Walmart and Amazon are two extremely popular organizations focused on retail that initially operated only in the US but have already reached the global market. Even though both companies represent the same sphere and provide customers with an opportunity to buy a wide range of various products, they differ in the way their stores operate. While Walmart is known as an organization that owns brick-and-mortar stores (those that have physical buildings), Amazon encourages people to stay at home and try online shopping. Regardless of this huge difference, Walmart and Amazon are great competitors. This situation is not likely to alter soon, as some professionals claim that they have the potential to be the only representatives of retail business in the future (Rittenhouse, 2017). It is beneficial that these organizations do not focus on the same market. For example, Walmart is mainly targeted at suburban individuals and companies who represent middle and lower-income populations. Amazon, in its turn, offers its products to urban clients who have a rather high income. However, they serve the same market at some point, as Walmart also approaches online customers. Thus, it is vital to compare both organizations and reveal how their e-commerce strategies differ. This paper will also discuss companies’ assets, revenue models, and strategic acquisitions that let them expand and become even more popular among the representatives of the general public.

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Walmart’s and Amazon’s Key Assets

Walmart and Amazon started their retail battle when they both turned into the giants of their sphere. Still, the development of this opposition streamlined greatly when Walmart started to grow and reached the online market. This process was rather time-consuming and provided the company with an opportunity to have only a tiny practice, but it was enough to start a confrontation. Even though Walmart is still more focused on a traditional retail business, Amazon feels pressure because of its potential to reach other populations and win the competition. Nevertheless, Amazon seems to have a range of benefits that allow it to grow rapidly even without any physical stores. The largest online retailer still has the potential to reach numerous clients all over the world much faster than its competitor.

Significant financial assets provide both organizations with an opportunity to develop further. Walmart, for instance, can get any capabilities it believes to be important for successful operations. The company may develop new systems that are likely to enhance its competitiveness and attract more representatives of the general public. As a result, it can easily compete not only with Amazon but also with other online retailers. For instance, being a brick-and-mortar retailer, Walmart managed to meet the needs and expectations of the current society and reached the online market. Developing an e-commerce strategy and using advanced technology, the organization expanded greatly. Moreover, this change allowed it to increase the diversity of its clients.

In addition to that, Walmart’s reputation makes other organizations consider the possibility of cooperation. The company can develop through acquisitions. For example, it has already bought a start-up, which enlarged its targeted market and provided an opportunity to improve its presence in the sphere. It has also acquired a small competitor of Amazon, which gave the organization the power to stand against it. As this company is fast-growing, its potential increases because it is supervised by Walmart.

The physical footprint of this organization cannot be ignored as well. Walmart has a lot of stores throughout the USA, which appeals to numerous clients who are not willing to purchase goods online. As a result, the company receives an opportunity to serve the market that is not available to online retailers. Furthermore, the company owns the largest private transportation fleet. In this way, it receives an opportunity to reach its customers without any interference from other organizations. It is a great opportunity to minimalize expenses and reduce possible issues connected with transportation. Customers also tend to be more satisfied knowing that their purchases are carried by the retailer itself. Other online companies tend to cooperate with other firms in order to transport their products. Finally, Walmart has an expanded distribution network. For instance, it has a lot of warehouses where products can be stored for a needed period of time. Online retailers, including Amazon, also have them, but they often deal with a lack of space as all their goods are to be placed there.

Amazon’s main assets include its property, equipment, and net. The company owns buildings and land where its personnel works and from where all activities are controlled. They are good enough to compete with Walmart because they are good enough to gather the management and supervise different teams. A lot of attention should be paid to the company’s equipment. Being an online retailer, Amazon operates due to its servers and networking equipment (“Analysis of property, plant, and equipment,” 2017). It is vital for the company to ensure its presence on the Internet that is why it uses advanced technology. Even though Walmart also has this asset, it is not as developed as Amazon’s one. The company operates in the sphere of e-commerce, but it does not emphasize such a capability and still focuses on traditional retail. Amazon, on the other hand, has well-developed software and website that give it an opportunity to reach its clients and increase revenue. Even if Walmart decides to follow its steps and focus on its online presence, it will need a lot of time and resources to reach Amazon’s achievements. The company constantly invests in its software and website development, which gives it a chance to make those changes that appeal to the representatives of the general public and simplify operations.

Walmart’s and Amazon’s E-Commerce Strategies

A recent change that happened to Walmart is its performance as an online retailer. The company entered e-commerce in order to reach more clients and receive an opportunity to enhance its competitiveness. Focusing on an omnichannel strategy, the organization continues operating in the framework of traditional retail as well. Walmart is currently willing to successfully unite its stores and distribution system with e-commerce. It believes that the opportunity to reach a lot of clients can be received if it provides them with an opportunity to resort to usual shopping within physical stores and to order goods online. As a result, Walmart expects its clients to have an opportunity to buy the things they want and at the best price. In addition to that, it focuses on the opportunity to add more online sellers so that all operations can be streamlined. Free two-day shipping is considered because it allows clients to minimalize expenses and become sure that their purchases will be delivered when expected. Moreover, Walmart considers acquisitions as a part of its e-commerce strategy. It uses other organizations in order to reach online markets (Stambor, 2017). As a result, it also receives an opportunity to protect its initial business if something goes wrong.

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Amazon performs successfully in the online market for a rather long time already. It emphasizes free shipping, onsite review, and cross-selling as the main components of its e-commerce strategy. The organization is aware that a lot of customers do not offer things online because in some cases shipping costs turn out to be higher than the total cost of purchase. In order to prevent clients from abandoning their carts, Amazon covers its shipping costs with the help of the order value so that it can offer free shipping. The company also pays a lot of attention to the fact that people tend to buy those products that are discussed by others. Providing its clients with the possibility to provide their feedback on the website, Amazon minimalizes chances of their return and enhances customers’ perception about the product and the whole organization. The cross-sell is vital for online retailers because it encourages clients to buy more products of their interest. For instance, Amazon allows the users of its website to see what other people purchased along with a particular product (Blatt, 2014). As images are included, people do not need to spend more time and can easily see if they are interested in something. As a result, Amazon increases its sales.

Revenue Models of Each Company

Initially, it may seem that both Walmart’s and Amazon’s revenue models deal only with sales. Nevertheless, these companies make money in different ways. As Walmart sells a wide range of various products, it manages to reach a huge market share. The company provides numerous opportunities to buy products and operated in several types of stores. Almost every American has a Walmart store nearby, which increases the volume of sales and benefits the organization. All goods are sold directly to people and businesses, which allows Walmart to avoid additional spending (R&P Research, n.d.). Using a technologically advanced supply chain, Walmart shares detailed product descriptions electronically. In addition to that, it works directly with suppliers, which makes them responsible for inventory management. In this way, irregularities and other issues can be avoided, and operations become more cost-effective. Walmart also minimalizes operational costs, as its executives have almost the same conditions as general employees, low-benefit healthcare plans are used, and overtime work is not paid (Hyde, 2015). As the organization tends to minimalize its prices for clients, it also makes its suppliers do the same. Thus, Walmart generates its revenues through the minimization of expenses and direct sales.

A huge part of Amazon’s revenue is associated with retail. The company sells a lot of various products on its domestic and international websites. It offers numerous books, electronic devices, and equipment, etc. In addition to that, the organization provides its clients with an opportunity to sell their own goods. As a result, people receive an opportunity to buy both new and already used products, and Amazon increases its income (Unicorn Economy, 2016). On the basis of the sale price, it identifies a commission rate and fees that are to be paid by sellers. With the help of the Affiliate revenue model, Amazon provided individuals and businesses with an opportunity to create their online stores within its site.

Walmart’s Channel Conflict and In-Sourcing

Unlike Amazon that operates only online, Walmart is present at a physical store as well. This company emphasizes traditional retail and is more focused on the revenue obtained in this way. In particular, its “online sales only make up 3% of Walmart’s total sales” (BI Intelligence, 2017, para. 9). In this way, even if Walmart’s e-commerce operations fail to provide it with the expected benefit, the company will not face crucial issues and will be able to continue operating as usual. In addition to that, it is vital to pay attention to the fact that Walmart does not divide its operations and treats them as a whole. In this way, it manages to avoid internal conflicts.

The company is focused on in-sourcing of online operations because this approach provides it with an opportunity to reach the desired goal while utilization of other ways is not likely to be that advantageous. In particular, outsourcing to low-cost countries and domestic firms is not expected to provide the company with a chance to bring in new skills and capabilities. Walmart is willing to rebuild itself so that it meets current tendencies and satisfies various clients. It needs to extend the skills of its labor force to become able to innovate and provide new services.

Strategic Acquisitions and Fulfillment

Strategic acquisitions provide Walmart with an opportunity to improve its online presence. The company uses acquired organizations in order to provide those services it had not offered initially. In this way, Jet.com allows it to get into the sphere of IT and obtain more experience in online sales (Rey, 2017). Moreover, such a change gave Walmart a chance to compete with one of its greatest competitors, which is Amazon. The leaders of the organization realize that they need to provide up-to-date services that is why they focus on online retail. As Amazon is a current leader in this sphere, they had to consider the possibilities to compete against it, and Jet.com turned out to be rather useful for this purpose. Still, Amazon also made some strategic acquisitions. It owns more than 75 companies, which provide it with an opportunity to offer varied products (Wolff-Mann, 2017). As a result, it manages to satisfy diverse populations and constantly increases its targeted market.

Walmart’s fulfillment operation is focused on product delivery. The organization has the largest fleet in the country, which allows it to get to various places and deliver goods to its numerous shops. It can reach local stores and pick-up points without any delays. As a result, clients can obtain everything they need without any problems. Amazon, on the other hand, pays more attention to the use of robotics and drone delivery (Kharpal, 2017). Focusing on online operations, it also uses technology to maintain its operations in the most streamlined manner.

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Conclusions and Recommendations

Both Walmart and Amazon operate successfully in the sphere of e-commerce. However, Walmart can hardly be expected to beat its competitor in the nearest future. The company’s physical presence decreases its online sales so that they do not provide any significant advantage. It would be better for Walmart to extend its e-commerce or provide some benefits to those who purchase goods online if it is willing to increase its revenue. Moreover, Amazon manages to provide better offerings than Walmart. For instance, its shipping costs are lower, and there is a possibility not only to buy but also to sell goods. As a result, it can be concluded that Amazon is likely to win this competition. Nevertheless, Walmart always has an opportunity to develop additional strategies to improve its online retail and services.

References

Analysis of property, plant, and equipment. (2017). Web.

Blatt, G. (2014). 3 strategies your e-commerce company should borrow from Amazon. Web.

Hyde, R. (2015). How Walmart model wins with “Everyday low prices.” Web.

Kharpal, A. (2017). Amazon has an idea for delivery drones with robotic wings and legs to help them land. Web.

Rey, J. (2017). Walmart is in advanced talks to acquire online men’s retailer Bonobos. Web.

Rittenhouse, L. (2017). Only Walmart and Amazon will exist in the future of retail. Web.

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R&P Research. (n.d.). How Walmart makes money? Understanding Walmart’s business model. Web.

Stambor, Z. (2017). Walmart’s new e‑commerce strategy comes into focus. Web.

Unicorn Economy. (2016). Amazon’s business model and how does Amazon makes money. Web.

Wolff-Mann, E. (2017). What Amazon’s 76 acquisitions reveal about its strategy. Web.