Wal-Mart Makes Another Major eCommerce Move in Uphill Battle Against Amazon
Amazon has a stronghold as the largest eCommerce merchant in the United States, comprising as much as 43 percent of all U.S. online retail purchases in 2016. Wal-Mart, the largest brick-and-mortar retailer in the U.S., is one of the largest U.S. online retailers as well, but with online volumes less than one-fourth that of Amazon. With online and mobile sales continuing to cannibalize brick-and-mortar retail, Wal-Mart is focusing extensive effort on trying to take some of this online market share away from Amazon. After acquiring another major online retailer in late 2016, Wal-Mart has now announced a new online shipping strategy to undercut Amazon Prime, offering free two-day shipping on all orders of at least $35.
Amazon has been number one on Internet Retailer’s Top 500 list for many, many years now. In the latest ranking Wal-Mart is ranked fourth. While still the largest brick-and-mortar retailer in the United States, Wal-Mart sees the writing on the wall, and knows eCommerce is essential to the company’s continued growth and success.
Wal-Mart is certainly no laggard when it comes to eCommerce today; it’s just that Amazon has by far the largest online sales and market share, while continuing to grow rapidly. According to estimates from Internet Retailer, Channel Advisor and Slice Intelligence, Amazon grew from one-third of all U.S. eCommerce transactions in 2015 to 43 percent in 2016. Wal-Mart, by comparison, has a 9.2 percent market share of U.S. retail sales according to the same study. Wal-Mart may even be the second largest player in U.S. eCommerce retail. According to eMarketer, Wal-Mart was second only to Amazon in 2015 for total U.S. eCommerce retail sales at $13.5 billion, but this pales in comparison to Amazon’s estimated $79.3 billion.
It is very likely that Jeff Bezos read and studied Sam Walton – both are adamant about competing on and offering consumers the lowest price choice. While both have the scale and volume to be extremely price competitive, Amazon has the upper hand in technology, innovation and understanding the eCommerce market, or at least had this as the first mover advantage. Wal-Mart, however, has shown they will fight and not be beat at their own game. The first major move came in their $3.3 billion acquisition of Jet.com in August 2016, a site that focuses on online deals and discounts.
While not yet profitable, Jet.com was bringing in 400,000 new customers per month, which fit a younger demographic of online shoppers. This along with a massive product catalog, their brand, and website pricing strategy which increases discounts as more items are added to the cart, was enough to justify the multi-billion dollar purchase and ammunition to better compete against Amazon.
At the end of January 2017, Wal-Mart made another aggressive move to entice customers and compete against Amazon. While Wal-Mart previously offered a free shipping membership program similar to Amazon Prime, they have now scrapped that program to instead offer all customers free 2-day shipping (the top benefit of being an Amazon Prime member) for orders of $35 or more. Already having a major brick-and-mortar presence, Wal-Mart had one advantage over Amazon in that they could always offer free ship-to-store or in-store pick-up. Wal-Mart has now upped the ante, however, competing squarely against Amazon Prime, offering free rush shipping for all customers and no membership fee.
This is a strong move from Wal-Mart to compete with Amazon for more U.S. online sales, but Amazon may have more control and ability to reduce shipping costs in the future. While the drone delivery program may still be years away, Amazon is also building their own logistics and delivery fleet which will greatly reduce their shipping expenses. Of course Wal-Mart will likely continue to make more investments and changes to their eCommerce strategy as well, they have shown a willingness to go out and do things themselves, such as with offering their own mobile wallet and in-store payment app in addition to participating with the MCX CurrentC mobile wallet. While we don’t know exactly what either company will do over the next few years, it is very likely that consumers will benefit and eCommerce will keep growing as the two compete to hold on to and gain market share.
For more information: