The rivalry continues between Amazon and Walmart. Just a few months ago, I wrote about the impact of Amazon’s acquisition of Whole Foods, and how Walmart and the market in general would react. And while the rivalry has been growing over the last few years, that purchase seemed to stoke a fire under both companies, and things are only heating up.
While Amazon has a dominant position in the e-commerce space, Walmart is the brick and mortar king. With its low prices and seemingly endless product assortment, Walmart has dominated brick and mortar retail. In response, Amazon has been slowly mounting a brick and mortar presence by going back to its roots – book stores. With the opening of its latest brick and mortar book stores, Amazon has reached double digit physical stores. Obviously this is not going to make a dent in the Walmart dominance, but Amazon is moving into other brick and mortar areas. Most notably is the Whole Foods acquisition. But what makes the acquisition most intriguing is Amazon’s decision to slash prices at Whole Foods. Amazon is also using the brick and mortar presence to expand the Amazon locker program. As my colleague Clint Reiser wrote in last week’s logistics news round-up:
“Amazon plans to immediately make many of Whole Foods items more affordable. From a logistics perspective, Whole Foods brands will be made available through Amazon.com and the Prime Now same-day delivery service. Also, Amazon lockers are planned to be installed in select Whole Foods stores, allowing Amazon.com items to be shipped to Whole Foods locations and allowing Amazon.com returns to be processed from Whole Foods locations.”
Walmart is not about to turn a blind eye. Instead, the company is expanding its home delivery program with a partnership with Uber. The expansion is in the Dallas-Fort Worth area, where Walmart’s personal shoppers will pack groceries into cold pack bags for Uber drivers to deliver. The cost per order will be $9.95, with a portion going to Uber. This is also in response to Aldi’s decision to partner with Instacart on home deliveries. With Amazon moving in on deliveries for Whole Foods, Instacart is looking for all the business it can get.
Steve Banker had an interesting article earlier this week about how Jeff Bezos’ drone prediction was far too optimistic. As overly optimistic as it may have been, it certainly hasn’t stopped Amazon from filing numerous patents for drone deliveries. One of the more interesting patents was for a floating fulfillment center back in January. The basic premise is that Amazon will have a blimp or airship of some sort hovering at an altitude of around 45,000 feet, stocked with lots of products. When an order is placed, a drone will fly down from the floating fulfillment center and deliver the item within 10 minutes.
Well, Walmart is striking back. The company has applied for a patent for its own floating warehouse that could make deliveries via drones. The floating warehouse would fly at heights between 500 and 1,000 feet, and would contain multiple “launching bays” for drones. The airship itself could be operated either by a remote pilot or autonomously. While the core argument for these floating distribution centers is to reduce the cost of online orders, especially last-mile deliveries, current regulations make these patents more of a pipe dream. However, it is interesting to see Walmart respond with its own version of fulfillment from above.
The final piece in the increasing rivalry is private label brands. Walmart has always embraced private label brands, which are manufactured by one company to be specifically sold by a retailer. Walmart has made a name for itself by offering name brands for less, but also offering private label brands for even less. Amazon is jumping on the bandwagon, and has expanded its private label collection. Over the last eight years, Amazon has gone from 0 to around 20 private label brands. And in 2016, Amazon brought in $2.5 billion in private label sales. This is certainly an area that will be worth watching, especially with the prominence of the Whole Foods private label brand.
So if it seemed like the Whole Foods acquisition was the pinnacle of the Amazon – Walmart rivalry, I think we are just seeing the beginning. Walmart has been pushing back with the purchase of online retailers Jet and Bonobos, and Amazon is pushing ahead with its brick and mortar presence and price cuts. The big question cannot be answered until the FAA potentially revises drone regulations. Both Amazon and Walmart seem to be “all in” for drone deliveries, and the public will have to wait and watch this one play out.
I think the key is that both Walmart and Amazon are betting their future on a “marketplace” concept of one-stop-shopping. Both companies now carry items they don’t make or carry in any store. That is huge for Walmart and came from the Jet.com acquistion. This concept as well as the investment needed for technology to keep innovating improvements in the Omni Channel model is creating a distinct advantage for Amazon and Walmart. The barrier for entry in the “big boy/girl game” is significant and not easily resolved.