When Amazon started selling more
than just books in the late 1990s, it suddenly entered
into a rivalry with the biggest name in retail. Always low prices,
always Walmart. Walmart has been at the
helm of American shopping for 58 years. It employs more people than
any other company in the world. And 90 percent of
Americans live within 10 miles of one of Walmart's
more than 4,700 U.S. stores. The staggering size of
Walmart kind of escapes people. It's the largest corporation
in the world in terms of revenue. Yet when
it comes to e-commerce, Amazon is the clear leader,
with 38.7 percent of the market share compared to
Walmart's 5.3 percent. And with the global
pandemic shifting shopper's behavior for good, dominance in
online shopping is now paramount. So if you're that
second site, you got to be really good. You don't have
to be as good as Amazon, because no one
will get there. That's utopia. In perhaps
its clearest competitive move against Amazon to date,
Walmart is now launching Walmart Plus. The membership program
is meant to rival Amazon Prime, offering benefits
that can't be replicated online. These guys are toe-to-toe and
nobody wants to stop swinging. Nobody wants
to back down. You know, the consumer
is ultimately the beneficiary, clearly. Here's a look at
how Walmart Plus compares to Amazon Prime and all the
other ways Walmart is trying to catch up as the
pandemic makes online shopping an increasingly crucial part
of doing business. Walmart has been working behind
the scenes since at least 2018 to create a
competitor to Amazon Prime. From our data study, we found
that two thirds of people that had already joined
our premium loyalty program would join another one. Although the landing page says
Walmart Plus is coming soon, the pandemic delayed its
planned release in the spring. Walmart stock surged
seven percent when it looked like it would launch
in July, but that didn't happen either. When Walmart
Plus is available, members will likely pay $98
for benefits like unlimited same-day delivery on groceries from
the 1,600 of its 4,700 plus stores that do
grocery delivery n ow. When we did our data study,
81 percent of the consumers joined Amazon Prime because
of faster free shipping. Only two percent joined
because of grocery delivery. So I think it's a
real opportunity to leverage what they already have in groceries
and maybe what Prime doesn't. And just this
week, Walmart announced a partnership with Instacart,
testing out same-day grocery delivery in four
markets across California and Oklahoma. Other perks are
rumored to include early access to sale events,
discounts at gas stations outside of Walmarts and
Walmart-owned Sam's Club stores and reserved parking
spots in store lots. As you think about Prime, 150
million, why would you go head to head with that? If
you take a unique approach, which it sounds like Walmart
is doing, you might be able to get a
lot of those customers. Amazon launched Prime for $79 a
year in 2005, at a time when Walmart's profits were
greater than all of Amazon's revenue. If you look
back at 2005 Prime had one benefit, fast and
free shipping, two-day shipping, which was like unheard of. Fifteen years later, some 150
million Prime members pay $119 a year for one-day
shipping on more than 10 million items with no
minimum purchase amount, same-day shipping on some
three million items, two-hour grocery delivery in
2,000 plus cities, deals and sales events like Prime
Day and access to Amazon's entertainment branch, Prime Video,
Amazon Music, Prime Reading, Prime Gaming
and Amazon Photos. It's a pretty compelling
value proposition, and that's what anyone will have to deal
with, w hat if they want to try to
compete with Prime? Walmart doesn't have any
entertainment offerings of its own, now that it
sold Vudu in April. P rime members make up
about 65 percent of Amazon's customers and the program has
a 95 percent renewal rate after two years. Walmart started chasing this type
of loyal customer in May 2019 by offering free
next-day delivery on orders over $35, less than a
month after Amazon announced its default one-day shipping. With Walmart Plus, all orders
will default to free one-day shipping just
like Prime. Despite the launch of Walmart
Plus and free fast shipping, Walmart still lacks
one big thing that Amazon has - sheer
volume of inventory. Walmart.com has about 50,000
vendors selling items online, while Amazon
has 8.7 million. That's why in 2016,
Walmart bought discount online retailer Jet.com for
3.3 billion dollars. The acquisition brought relationships
with a slew of brands that were already
comfortable selling on Jet.com . They are on track to
more than quadruple their online business since they
acquired Jet. It was an uh-oh moment
for every other brick-and-mortar retailer, because now the
biggest brick-and-mortar guy is now, you know,
moving heavily online. E-commerce is a scale game and
you want to get as much leverage as you can
on your fixed infrastructure. And as you get bigger, cost
of goods goes down and you get more leverage. Marc Lore
spent two years at Amazon before breaking off to start
Jet.com , working to undercut prices from
the e-commerce megastores. Walmart's purchase of Jet.com was
the big move that brought it into the big
leagues of online shopping. When the deal was made in
2016, Lore signed a five year contract to run
Walmart's e-commerce division. I'm so excited to be at
Walmart, having a lot of fun. We're going to keep talking to
you because I think that you're the most inventive
man in retail today. Walmart shut down Jet.com in
May, but it had already brought an entirely new branch
of online sellers onto its marketplace. Walmart CEO
Doug McMillon says he would buy it
all over again. If you look at the
trajectory of our business, it changed when we made that
acquisition and we've been able to attract brands to
Walmart.com - S'well, R ay-Ban and Champion. Historically, Walmart.com didn't
sell things from third-party vendors, but since
the Jet.com acquisition the number of products sold
on Walmart.com has grown up to 10 times higher, and
the number of sellers on its site doubled just
in the last year. So they started
attracting more brands. They retooled their website to
be more streamlined and more intuitive,
more user-friendly. And last year, Walmart
partnered with Advance Auto Parts. Walmart was not going to
be a 100,000 SKU auto parts retailer on its own. They get that
with Advance Auto. This is probably the
largest third-party relationship that any online retailer
has with a brick-and-mortar retailer. And in an effort to
reach a new type of customer, Lore spearheaded the
purchase of several specialty apparel companies like
Bonobos, ModCloth and Eloquii, a lthough some have
been sold again since. A big portion of
Walmart store customers are lower-to-middle-income. I think what
they tried to do here and through the Jet.com
brand was to continue to go up market and go
for more profitable customers, urban millennials. And then
they also introduced the service Jetblack, which is
an upscale personal shopping service. For a
large fee, Jetblack allowed New York Walmart customers to
text orders to personal shoppers for home delivery. But Walmart shut it down in
February after it only saw about 600 active members. If we think about the
dynamics of the very, very affluent and wealthy today, I
don't know if Walmart is necessarily the company to be
housing a brand like that. But in June, Walmart
pivoted again, announcing a major partnership
with Shopify. Often referred to as
the king of mom-and pop-retailers, Shopify helps more
than 1.4 million small businesses run
their online stores. Now, these small businesses have
a channel to try selling on Walmart.com. For now, Walmart says it's
adding 1,200 of Shopify's top merchants to its
site in 2020. Walmart wants a curated
assortment on the website. I mean, Amazon has
a very wide-ranging third-party business, and with th
at comes some risk. The partnership with Shopify
is really important, I think it's very strategic. And I do think it is
an attempt to pull away those third-party sellers
on Amazon. There has been kind of
a lot of tension between third-party sellers
and Amazon. On July 29th, Jeff Bezos
testified before Congress for the first time in Amazon's
26 year history, partly in response to questions about
reported use of third-party seller data to
develop Amazon's own competing products. The House
Judiciary Committee is investigating whether Amazon,
along with Apple, Facebook and Google, need to
be governed by stricter antitrust laws. Why should a third-party so
list their product on Amazon if they're just going
to be undercut by Amazon-own ed product as a
result of data you take from them? I think what I
want you to understand, and I think it's important to
understand, is that we have a policy against using
individual seller data to compete with our
private label product. You couldn’t assure Ms. Jayapal
that that policy isn’t violated routinely. While Amazon is battling to
keep the trust of its third-party sellers, Walmart still has
a long way to go if it wants to catch
up with the millions of third-party sellers that make up
more than half of Amazon's sales. The Walmart
marketplace is a lot smaller, so you could be,
quote unquote, crushing it on page one on Walmart
and you're still not getting that many sales. Still, Walmart
has one big, long standing advantage over Amazon,
its 11,500 global stores. If you're a third-party
seller, like if you can get into brick-and-mortar
Walmart, you're going to crush whatever sales on
Amazon you're doing. For sellers choosing where
to reach customers, stores are a big bonus
and much more scalable. So this diet pill company I
worked at, they had 30 different products that we
were selling on Amazon. I launched a whole bunch
of them. We brought their sales from one million
to three million. And I thought that was like
the greatest thing in the world. But that was nothing,
because I would see purchase orders come across my
desk for the Walmart brick and mortar side, for
the Walmart stores, there would be like two million
dollars just for like one region of the
United States. Walmart stores also help keep
down its costs in the most expensive area of
online retail - shipping. If you can leverage those
stores as your fulfillment centers, meaning if I'm
going to purchase something and I'm in the Philadelphia
area, have it come from the store that's three blocks
from my house as opposed to Virginia , you know, price
points go down and speed goes up. Amazon has been
spending wildly to try and control the expensive shipping
process, but it's 175 fulfillment centers and own
network of planes, trucks and contracted delivery drivers
don't come close to the reach of Walmart's 4,700
stores that allow its trucks and drivers to travel
a fraction of the distance. Walmart had the
advantage of getting product from distribution center to the
store, and then the consumer handles the last mile
for a lot of it. Walmart uses its stores
as distribution centers for products, but also has its
own dedicated network of warehouses without a
front-facing store. Walmart remains dominant in
another sector that's largely dependent on
brick-and-mortar stores - groceries. We're not very
densely populated, and so it's hard to service, in
an e-commerce model, grocery. So what that means is that
Amazon is really at a little bit of a
disadvantage relative to Walmart. They have stores within 90
percent of the population in the United States. Grocery
sales account for more than half of Walmart's U.S. revenue, making Walmart the
nation's biggest grocer. Walmart's been selling groceries
directly to customers since the 80's, and the
online sale of groceries is now boosting Walmart's
overall online sales. The percentage of all U.S. grocery sales happening online is
set to double from 20 percent in 2019 to 35 to
40 percent this year a nd next. You find your grocery
vendor and you tend to stick with them. You also get
a treasure trove of data from grocery customers
about their preferences. A nd you can use that
dat a, and I believe Walmart will use that data, to
sell them other things. I think that Walmart is going
to win in this grocery battle versus Amazon. When Amazon bought Whole Foods
for 13.7 billion in 2017, it was a clear
move to compete with Walmart. But with roughly 475 stores,
Whole Foods has about a tenth of the locations as
Walmart does in the U.S. You cannot find a
tougher brick-and-mortar segment to get into than food. You've got to manage a
million vendors, produce is hard, meat is tough. And they chose to
get into that business. They're still learning. Then in
2019, a month after Amazon announced free two-hour
grocery delivery for Prime members in 2,000
regions, Walmart announced a membership program offering
unlimited grocery deliveries from
1,400 stores. It costs $12.95 a month or
the same $98 annual fee of the new Walmart
Plus membership. Or for an extra seven
dollars a month, Walmart will deliver groceries straight into
your fridge in a handful of cities. Digital grocery
is the next big battleground in e-commerce. It's a one trillion dollar
retail category that is today the least
penetrated category online. So as it continues to grow
at outsize d rates, there are tens of billions
of dollars at play. In one survey before the
pandemic, about 39 percent of U.S. consumers reported having
shopped online for groceries at least once. By May, that number
was nearly 80 percent. But how many people are
going to go back to conventional shopping or how many
people are going to stay with buying their
staples online because they can? While the pandemic boosted
the importance of fast grocery delivery, Walmart has
an even faster, more cost-effective option -
curbside pickup. When you pull up, they put
it in the car and you're gone. That's a big weapon. While this is an option
at Whole Foods stores , customers need to wait
for regular Amazon.com purchases to be delivered. In July, Prosper Analytics found
that 62 percent of adults are shopping
in stores less. So as the pandemic pushes
so many online for their shopping, Walmart's name
recognition with older shoppers is also a plus. My parents, as an example,
they're not the most robust online shoppers, but when this
pandemic hit like they had no choice. But they've
been to a Walmart before. When forced to purchase things
online, you're going to go with who you know
and who you trust. Walmart hired 200,000 employees
during the pandemic to help clean stores and
keep items in stock. It's giving a third round
of bonuses to hourly employees working during the pandemic
for a total of 1.1 billion dollars in bonuses
this year while facing backlash for sick
and dying workers. Now, for the first time in
30 years, Walmart will be closed on Thanksgiving Day. It's also cutting some corporate
roles as it merges its online and
store businesses. Amazon meanwhile, postponed its
annual Prime Day event that usually sets sales
records in July. It offered one-time bonuses
to front-line workers totaling 500 million dollars and
gave workers a two dollar-per-hour raise from
March to May. It hired 175,000 workers to
keep up with demand during the pandemic, but faced backlash
for keeping all its warehouses operational despite
worker deaths. Still in the second
quarter of 2012, Amazon's first-party sales were up
48 percent year-over-year, with third-party sales
up 52 percent. Walmart's online sales rose 74
percent in the first quarter of 2020. I mean,
you could argue during the pandemic that Walmart's taken a
bit of a lead because they haven't publicly had
the delivery delays, the product to the consumer delays,
that Amazon has had. When I began reporting on
the pandemic in March, I discovered that Amazon was
actually trying to get shoppers to buy less. Fewer nonessential orders meant
they could focus on shipping things like hand
sanitizer and masks to hospitals and
state agencies. That's when I decided to
give Walmart a try. My last order on Amazon
was back in February, which was before they had a
lot of those shipping delays that were caused by supply chain
issues and such a big surge in demand. When I stayed
home, I decided to get my groceries from Walmart and
they usually came the same day or the next day. When I ordered other items
on Walmart.com, they always arrived within the delivery window
and I never had any delays. In San Francisco, sometimes
they even came the next day. They still don't
come anywhere close to Amazon when it comes to
the selection of items that you can get through online
and get to your house within one or two days. So I think right now Walmart
and Amazon are locked in a steel cage death match
to become the country's everything store. So what does
Walmart have planned as it continues trying to
catch Amazon in e-commerce? For example, Walmart launched
its own voice assistant called Ask Sam in July for
employees to use to help shoppers find products and
prices in stores. They're trying to find ways
to use those physical stores in new ways. Not just distribution, but
also, you know, they're talking about medical and
financial and edge computing and all of these other
things that really leverage the stores. For now, the launch
of Walmart Plus has analysts hopeful that one day
it could at least provide a second option for
Amazon customers to turn to. Amazon has set a very
high bar, but they've also given people the playbook
to kind of follow. And then once you figure
out how to integrate online into your stores, there's
immense profitability as well for the
brick-and-mortar guys.
