Ignoring the Clash of the Titans is a recipe for “death by mediocrity”
Image Credit: Pixabay
There was a host of recent announcements that foretell the clash of the retail titans is unfolding at unprecedented levels. Everyone now competes with Amazon … everyone including Walmart. For decades, Walmart was often cast in the role of the “evil empire”, which crushed local community retailers on the basis of price and selection. Amazon has been hailed as the rebel innovator creating unparalleled consumer centric service. However, given Amazon’s tremendous growth and rapid expansion, has it in fact become the “Death Star” threatening even the behemoths like Walmart? The clash of the retail giants will be fascinating to watch, and will have a profound impact on the entire galaxy of retailing.
Why this is important: Both Amazon and Walmart are aggressively changing the rules of retail in the US, as well international markets. For any retailer competing to survive, the one real threat is “death by mediocrity” and lack of differentiation.
At Amazon, “tomorrow is always day one”
Someone asked “why does Amazon get so much press?” Well, there’s hardly a week that goes by that there isn’t an Amazon story about another piece of innovation. Bezos’ mantra of “tomorrow is day one” literally drives innovation across every facet of Amazon’s business: an online retailer now opening stores, a marketplace, a distributor, logistics, music, now movie creation, ecosystem and the list goes on and on.
But, what frightens retailers the most is Amazon’s recent moves into many new categories, including food and fast moving consumer goods. With Amazon’s aggressive acquisitions and partnerships, Amazon has its sights on anything in the consumer space, and virtually anyone selling consumer products. Amazon’s most recent forays into food and apparel is a direct threat to Walmart’s core categories that drive store traffic.
The magnitude of Amazon’s reach knows no bounds
Business Insider reports that Amazon “is about to tap into one of America’s biggest clothing trends by launching its own athleisure brand, making it a competitor to Luluemon, Gap’s Athleta, Under Armour, Nike and other top sportswear brands.”
To put the magnitude of Amazon’s potential apparel growth in perspective, Amazon will surpass Macy’s at the biggest apparel seller in the US this year. Consider the following stats in relation to the apparel category that has been the traditional mainstay of traditional bricks and mortar retailers:
- Amazon clothing and accessories are expected to grow 30% to $28 billion
- Macy’s sales by comparison are expected to shrink 4% to $22 billion
- Amazon’s currently claims market share of 6.6%, expected to increase to 8.2%
- Within five years Amazon’s share of apparel is expected to be 16.2%
With the expansion of food and additional of apparel to its core categories, Amazon is literally everyone’s competitor in the US, and will attempt to span the globe.
Image Credit: Unsplash, Tobias Cornille
Walmart’s counters with new moves in a “Jet age”
Walmart’s $3 billion purchase of Jet.com last year was one of the clearest signals that Bentonville was not only taking Amazon seriously, but making serious investments to be able to compete online. Under the Jet.com umbrella, other ecommerce players have been acquired in home furnishings, shoes, etc. The initial plan was that Jet.com would be operated separately in order to significantly upgrade Walmart’s online expertise and sales.
However, Walmart’s recent reorg at the executive level is a sign of something far more significant than just a management shakeup. The Journal provides the real background for these executive changes as: “a more complete reworking of Walmart’s ecommerce leadership structure”. Case in point: CEO Doug McMillon announced that Scott Hilton, formerly of Jet.com, would become chief revenue officer for all of ecommerce across Walmart operations. Much like John Lewis in the UK, there appears to be a comprehensive strategy from the top down to strategically organize in Walmart holistically as a more integrated omnichannel retailer.
Walmart’s moves signal that omnichannel is the new normal for all
Re/code offered the following analysis which cuts to Walmart’s core issue and challenges:
“If Walmart is going to better compete with Amazon, its stores are going to have to become a real advantage — not unwanted baggage.”
Food has been used by Walmart and Target to draw shoppers into stores, with the hope they will buy other profitable items. All retailers, even the largest, are under increasing pressure as Amazon pushes deeper into core categories like groceries and apparel. Amazon may pick off even more of Walmart’s core customers with its pilot food stamp program, not to mention opening its own physical convenience type stores, which sell food and serve as potential hubs to deliver fresh food.
In what is now a “Clash of the Retail Titans”, Walmart is responding to the Amazon threat with its own Jet.com Fresh service, including offers of fresh food delivery without any membership fee. The spiral of services between these two giants keeps escalating in order to meet the rising expectations of today’s omnichannel shoppers. Simply matching Amazon service for service will not be enough for Walmart.
The most telling sign that Walmart has truly gone “all in” on an integrated omnichannel strategy is this recent quote from CEO Doug McMillon: “We were starting to see our stores and ecommerce teams solving many of the same problems … and now we can remove what might’ve become more duplication in the future“.
Translation – Walmart can no longer think it terms of online and stores; they must be seamlessly integrated because that’s how today’s consumers shop and purchase.
So, who is the “Death Star” of retail … can anyone else survive?
One of my favorite retail analysts, Kevin Coupe from the Morning News Beat, offered one of the best summaries I’ve seen on the state of retail and what is to come in 2017:
“The pitched battle between these two behemoths [Amazon and Walmart] is going to be fascinating, and will dictate the shape of the retail landscape for years to come.
What makes this even more interesting is that some people see Amazon as the Death Star, and others see it as part of the Rebel Alliance. It all depends on where you are sitting.”
While Walmart might not yet see Amazon as the Death Star, it clearly recognizing it as a force to be reckoned with. They are now strategically organizing to battle for customers at all levels. As for the rest of retail, pick one or both Amazon and Walmart. They will be a major threat to everyone’s business! Just ask Macy’s about their forecasts and store traffic.
The rest of retail has entered the age where their greatest threat is not Amazon per se. The greatest threat for all retailers is one of “death by mediocrity”. To survive both Amazon and Walmart, retailers cannot afford to be “average”. Products, Price, Place and Promotion no longer differentiate. To avoid death by mediocrity, retailers must work harder than ever to differentiate value to customers, at more touch points, through better service and support.
Sam Walton’s advice to retailers has never been more sage or important:
- To succeed in this world, you have to change all of the time.
- Focus on something the customer wants, and then deliver it.
- You can learn from everybody.
- Take the best out of everything and adapt it to your needs.
- Do it. Try it. Fix it.
