Amazon Should Buy Its Way Into Brick and Mortar

Just as Walmart appears to have its own “get big fast” online strategy by acquiring the assets, and more importantly the skills of pure e-commerce players, why doesn’t Amazon get even “bigger faster” by acquiring brands and retailers, along with their skills and knowledge, from the physical world? And the two sectors that Bezos has publicly proclaimed as priorities, “We need to get grocery and apparel right,” would seem to be ripe for an acquisition strategy of specialty apparel retail brands and/or successful grocery nameplates. Why not acquire Ralph Lauren or Trader Joe’s?

It was rumored that Amazon was eyeing Whole Foods, but in my opinion that is unlikely, particularly since Whole Foods is struggling to reposition itself. And the only Amazon acquisition close to apparel was Zappos in 2010. However, some experts are saying that Zappos is now in Amazon’s “learn, burn and churn” zone, and could soon be on the chopping block. Having learned the shoe business, and with Zappos only accounting for an estimated $3 billion of Amazon’s total of roughly $136 billion in revenues, Amazon supposedly doesn’t need Zappos any longer.

Another example of the “learn from and dump” strategy was Amazon’s acquisition of Quidsi.com (parent of online baby products including diapers.com) from its founder, Marc Lore, in 2010. They learned the business, captured the customers and vendors, claimed it was unprofitable and shut it down.

Marc Lore then proceeded to launch Jet.com and raced to scale with a mission to go to war with Amazon. But something happened on the way to the war, enter a starship called the beast from Bentonville, who was also racing into war with Amazon. And abracadabra, Walmart buys Jet.com, appoints Lore as CEO of global e-commerce, and overnight gains great e-commerce skills as well as fulfillment infrastructure, products, a younger consumer segment and revenues. Jet.com escapes a funding slow-down, gains Walmart’s deep pockets and all of a sudden Lore can look forward to a head-on battle with Amazon much sooner than he could have on his own.

Walmart Leapfrogs to Speed Ahead

In April 2014, I wrote “Walmart Can Crush Amazon.” I focused on all of the competitive advantages Walmart has over Amazon, and if leveraged, implementing the right strategies, over time (and given the time), they could beat Amazon at its own game. The one major disadvantage I cited as an impediment to getting there was Walmart’s plodding and questionable efforts in perfecting and growing their e-commerce business and integrating it into an omnichannel model. In August 2016, I wrote that Walmart leapfrogged over that e-commerce disadvantage and took a shortcut to the many years of catching up to Amazon (and the risk of possibly never catching up) by agreeing to acquire Jet.com for $3.3 billion.

So with Amazon’s “get big and bigger faster” mantra, along with their “learn fast, fail fast, or double down fast on promising new models” philosophy, why don’t they scale faster in grocery and apparel through acquisitions? Even if the brands eventually end up being dumped, Amazon will have learned on the fast track, and like with Quidsi and Zappos, they will have retained the skills, customers, vendors, revenues and more importantly, if they acquire brands such as Ralph Lauren or Trader Joe’s, they will also gain physical assets such as stores and distribution centers.

From Last Mile to a 100-Yard Dash

Walmart is moving at a speed that most industry experts find hard to believe. In fact, while Amazon has focused on vertically integrating its distribution and delivery chain, buying and/or leasing fleets of trucks, planes, trains, drones, driverless cars and you name it, including turning the “last mile” into a hundred yard dash, Walmart already has a distribution infrastructure in place that puts their entire inventory, physically way more accessible to consumers than Amazon.

The median distance to a Walmart store (4500 of them, also becoming distribution centers) for 90 percent of the United States population is 4.2 miles. Piper Jaffray analysts estimate that the locations of Amazon\’s fulfillment centers bring it within 20 miles of 31 percent of the population. So, Walmart has a shorter “last mile” than Amazon, and their stores/distribution centers are almost within walking distance for their BOPIS customers. Reminder: Amazon has no stores; advantage, Walmart.

And as Marc Lore stated in an interview during the recent Shoptalk event, Walmart’s CEO, Doug McMillon has given him free reign to move fast, to innovate, to invest, to acquire, and essentially to do whatever it takes to become Amazon’s biggest nightmare (my assessment). Lore has to be thrilled. And he’s wasting no time.

Store No. 8

Walmart recently launched Store No. 8, which Lore describes as incubation and innovation hub intended to “be the force driving commerce at a time when emerging technologies are influencing all aspects of consumers’ lives.” According to a Walmart spokesperson, new ideas can thrive outside the constraints of short-term process and profitability. “It will incubate, invest in and partner with early-stage startups, venture capitalists and academics to innovate in areas such as virtual and augmented reality, robotics, machine learning and artificial intelligence.” The earlier acquisitions of Shoebuy, Moosejaw and Modcloth are early stage startups that will now have the financial backing and innovative ecosystem needed to grow. And Bonobos may be next to join the giant’s growing “long tail,” as Walmart is currently negotiating to acquire them.

Then there’s the recent hire of Jennifer Fleiss, cofounder of Rent the Runway, who will head up Store No. 8’s first portfolio brand, Code Eight, as cofounder and CEO. Code Eight will develop one-on-one personalized shopping experiences.

The Walmart Advantage

Doug McMillon sees the future and it’s a combination of digital and physical. He had to know they were slow in their pursuit of e-commerce and technology. He embraced that challenge. He pivoted real fast in his mind. And he is now pivoting the entire enterprise and demanding transformational speed. And he is willing and able to acquire whatever skills, assets, and knowledge — whatever is needed to move successfully into that future – and fast.

Jeff Bezos must also see a future of digital and physical. But contrary to his “get big fast” mantra, he is certainly moving slowly into the physical world. Maybe he needs to launch an acquisition strategy to buy his way in.

Whatever he does, a new speedboat called Walmart may soon become his biggest nightmare.