Now that Amazon’s acquisition of Whole Foods is official, I thought it would be a good time to revisit this issue, and see if opinions have changed.
I was and still am of the opinion that Walmart has certain strong advantages over Amazon; certainly not enough to guarantee victory, but enough to give the overall advantage to Walmart.
[li]Well-liked by most people[/li][li]Fewer inherent costs of business[/li][li]Many, many options for many products[/li][li]Experience in filling orders quickly[/li][li]Prime[/li][/ul]
[li]Innovative[/li][li]Not afraid of making mistakes[/li][li]Surprisingly nimble for a company of that size[/li][li]The biggest and best logistics system in the world, outside of the US government[/li][li]About 4,600 stores in the US (not counting Sam’s Clubs)[/li][li]A huge customer base (140 million customers per week)[/li][li]Can cut costs better than almost anybody else[/li][/ul]
Back when the Amazon-Whole Foods merger was announced, one commentator said something to the effect that “Amazon is trying to become Walmart faster than Walmart can become Amazon.”
Lo and behold–the very first thing that Amazon did, once everything was official, was to slash prices at Whole Foods.
I think that this acquisition is going to be something of a double-edged sword, and unless Amazon is incredibly careful, it’s going to hurt them at least a little bit. After all, one of their greatest strengths up to this point was that they didn’t have the costs associated with running a nation-wide group of physical stores. Whereas those costs are already baked into Walmart’s business model. Amazon thinks that having those 460 stores will make their logistics easier, because now customers have all those physical locations to go to and pick things up. But Walmart has literally 10 times as many stores, and they, too, are leveraging the physical locations to their benefit.
#1-- Amazon’s logistics operation is good. But Walmart’s is better.
#2-- With this merger, Amazon is now starting to fight Walmart on Walmart’s home territory. Retail history is littered with the corpses of companies who discovered–too late–that such a move is a highly risky proposition. As a matter of fact, Target is the ONLY company to pull such a move and thrive on the battle.
#3-- Even though Amazon is the king of online retailing, Walmart is the king of retailing in general. Amazon has annual revenue of $136 billion, whereas Walmart has annual revenue of $486 billion. And Walmart is not afraid to spend money when they see a need for it. Their profit has actually shrunk nearly $3 billion over the last couple of years, because of all the spending they’ve been doing to improve the company.
I admit that that Amazon has some impressive strengths. And against any other company, the outcome would be almost a no-brainer. But I think that Walmart has the edge in this battle.