Amazon Frightened the Behemoth And It Boomeranged
walmart-bohemoth_350.jpg

Written by:

Share

Facebook
Twitter
LinkedIn
Pinterest
Email
Print

\"TheThat would be the Walmart behemoth, still the one and only behemoth of its size in the world, the last I took count.  At about $61 billion in annual revenues, Amazon is still a puny contender to Walmart’s nearly $500 billion.  But, relatively puny as they might be, they scared the pants off Walmart several years ago when it was rumored they were about to open brick-and-mortar stores.

And although the behemoth did not heed FDR’s advice: “The only thing we have to fear is fear itself.” It was a good thing that they did not. Because if they had not feared Amazon’s rumored move, Bertrand Russell’s quote would not have been so prescient to Walmart’s management: “To conquer fear is the beginning of wisdom.”

If not solely due to a reaction to Amazon, Walmart nevertheless got wise real fast. And they got wise in how they viewed the future of retailing and their participation in it. In other words, the paradigm was shifting in Bentonville, and still is. And now it should be Amazon who is shaking in fear.

The Scenario

I believe the fear led to some epiphanies in the management ranks down in Bentonville.  Seeing the future more clearly, I think they looked at their business model and said, “hey guys, we’ve been stuck in our paradigm of the past: a store is a store is a store.”

In fact, they were so focused on stores being stores, that a few years ago when a top executive at Walmart was asked if the rumor of Amazon opening stores was true, his reply was not a mild, “we’d be concerned,” or even “we’d view that as a serious competitive threat.”  He said, “That is Walmart’s biggest fear,” with the emphasis on “is,” meaning, of course, that there was more fact than fiction smoking out of that rumor.  And indeed, the drums are now beating louder in anticipation of Amazon launching brick-and-mortar stores.

So, what happened in Bentonville was epiphany #1, which caused a complete flip from playing defensive to going on the offense. From a fear of Amazon coming onto their turf with Pentagon-sized consumer data and opening showroom-like stores tailored to local consumer preferences. Walmart, rather than shaking in their boots, awakened to the understanding that they were looking at their business model the old-fashioned way and operating with old-growth strategies, accordingly.

The Epiphany and Newfound Wisdom

Walmart awakened to the fact that a store isn’t a store, and likewise, a website isn’t just a website.  These are not two distinct and discreet businesses.  And more than just seeing its business as an “omnichannel,” that over-worked buzzword, Walmart, in my opinion, cleared the fuzz from their vision and saw their business as being a direct-to-consumer distributor of goods and services.

When viewed as such, they can envision and create all kinds of virtual and real distribution channels and platforms, including smaller neighborhood stores and even potentially operating on competitors’ platforms.  All, of course, must be responsive to wherever, whenever, however and how often the consumer wants to purchase.  So, Walmart then assesses their enormous global enterprise of some 4500 stores and redefines them as distribution centers (as Macy’s and other enlightened retailers have done) where online purchased goods can be picked up or returned.  Additionally, Walmart is still a physical shopping destination, while Amazon has zero stores. And to cite the now well-known fact that shoppers who shop both online and off spend 50% more than those who shop only one channel, just adds a synergy weapon that Amazon lacks.

Viewed through this new lens, those guys in Arkansas have themselves a big chuckle, as they talk about puny little Amazon (no longer the specter of death) scurrying around placing distribution “lockers” in Staples, Rite Aid and others.  Furthermore, Walmart realizes that its online sales of about $9 billion is less than 2% of its total business. And while in absolute numbers, that ranks them second only to Amazon online (in its channel) with its size leverage, including 4500 distribution centers (and stores) to Amazon’s roughly 100 (and zero stores), it also means their opportunity to quickly ramp up, or to “get bigger than Amazon, faster” to use Bezos’ mantra, is enormous.  Should Amazon now be afraid of losing their dominance online?

That said, Bezos calls the start of every day, “Day 1.” He’s truly a genius and if, as predicted in my past article, Amazon launches stores (more as localized “showroom” experiences) and assaults the behemoth in every neighborhood and on the global playing field, the guys in Arkansas will likely stop chuckling.  As pointed out in that article, Amazon’s growth since 2006 was a blistering 300% (while Walmart grew 21% during the same period).

My question at the time, as it is now: “So, how long does it take a $69 billion business, growing at a 300% pace every five years, to reach $500 billion in sales?” You do the math. Answer: it’s about eight years. And, if they synergize the ecommerce business with stores, it might even be sooner.

So, welcome to the heavyweight championship of the world. In one corner, we have the reigning and current champion, the “Behemoth from Bentonville.”  In the other is the smaller and lighter, but feisty and fast, “Amazing Amazon Apocalypse,” who claims to float like a butterfly and sting like a bee. Ladies and gentlemen, place your bets.

Related

Articles

Scroll to Top
Skip to content