Wal-Mart has long been the world's biggest retailer of general merchandise. Along the way, it also became the world's biggest seller of groceries. Seems to qualify it as one nimble retailer always looking for ways to better serve its customers as the perennial company of the future, doesn't it? At least I think it does.
Well, perhaps not if it's unable to transition itself into a company with an Amazon type e-commerce retailing capability. But my guess is that Wal-Mart will do just that and perhaps even 'out-Amazon-Amazon' in the process of doing so.
So let's have a little theoretical thought experiment describing a head-to-head retail battle between the future Amazon and Wal-Mart, respectively. And in our hypothetical, or perhaps not, future head-to-head competition, they'll each be using using the same competitive business model, except for one really big difference.
And that difference suggests that Wal-Mart will win the match-up due to its physical store locations. These stores will be used as a competitive advantage as they are in in addition to Wal-Mart's existing status as the lowest cost retailer able to put a broad assoprtment and heavy volume of product offerings through its best-in-class distribution network.
And since it's also the leading retailer at managing real time information among its current retail competition, I believe it will be easily able to match Amazon's dynamic pricing methodology too.
In other words, Wal-Mart will use its physical stores, low cost operating structure and second to none logistics capability, along with its second to none information management capability, to beat Amazon in a close race to establish the store of the future. At least that's my bet.
We'll call this "new" store of the future the bricks and clicks retailing model. Physical stores combined with information driven logistics and customer focused delivery capability which puts the consumer in charge of having it "his way." Sounds like a winner to me.
Big-Box Stores Wrestle E-Commerce Gorilla has the fast developing e-commerce story of this year's holiday shopping season:
"Forget Cyber Monday. This year, it's Cyber Two Weeks.
Major retailers are trying to take on online rivals by
extending online sales after Cyber Monday.
Major retailers like Wal-Mart, Target and Best Buy are extending online sales in both
directions from the Monday after Thanksgiving, the biggest online shopping day
of the year in the U.S. by sales, according to comScore. But for many big-box
stores, their online tactics during the holidays have the same goal as during
the rest of the year: Take market share from Amazon.com.
Indeed, Amazon, whose global revenue from retail totaled $46.5 billion in
2011, is the gorilla in the e-commerce room. By comparison, Wal-Mart has said it
expects to do over $9 billion in global e-commerce revenue in fiscal 2014,
beginning in February.
Amazon sells many of the same products as big-box stores but can undercut them on price due to lower overhead. It also uses computer algorithms to adjust prices in real time. Traditional retailers often can't move as rapidly because online prices must match those in stores.
But Amazon has been matching them, with a pre-Black Friday sale and its own Cyber Week that makes the promotions little more than a discounting arms race.
Of course, bricks-and-mortar retailers also use their websites to draw consumers into their stores where shoppers are more likely to make impulse purchases. Wal-Mart says it is channel-agnostic, and over 50% of its online sales are picked up in stores.
But traditional retailers can't afford to be sanguine. The percentage of total U.S. retail sales going to e-commerce was 5.2% in the third quarter, on a seasonally adjusted basis, and has been steadily rising since late 1999, according to the Commerce Department.
For traditional retailers, this means finding ways to get beyond competing with Amazon on price....
Another strategy is creating an online shopping experience that promotes browsing. That is instead of the highly specific searches most shoppers do on Amazon, according to . . . an e-commerce veteran.
Big-box retailers have begun to dabble in some of these areas by sending out more targeted emails and highlighting one-day-only deals. Target has also developed its own product lines by collaborating with high-end designers. It also forged an alliance with Neiman Marcus to carry a gift collection this holiday season. The hope is this will give it an edge in drawing buyers to its website since those products can't be found elsewhere.
But as long as the vast majority of what the big-box retailers carry can also be found on Amazon, they aren't likely to dent its online dominance."
SUMMING UP
The "bricks and clicks" retailing model is an idea whose time has come. And Wal-Mart is best positioned competitively to make it work.
In the final analysis, Wal-Mart has the advantage over Amazon because its store locations are places where customers can shop and also pick up purchases made online. Or if they prefer in the future, have their purchases delivered directly to their homes. At least that's the future I envision for Wal-Mart.
And its total focus on being the low cost provider will drive it to offset Amazon's current cost advantage resulting from having no retail outlets. Wal-Mart will implement a total cost productivity strategy which will emphasize its unique selling capability as customers can have whatever they want and have it "their way" at an everyday low price equal to Amazon's pricing. Advantage Wal-Mart!
Hence, compared to Amazon's lack of physical stores, Wal-Mart will turn its vast network of physical stores into its competitive advantage. In other words, it will become as efficient as Amazon at delivering from its distribution centers while also maintaining a convenient physical venue for its customer base to shop, pick up merchandise, browse and buy groceries.
So to me it looks like Wal-Mart will emerge the eventual online as well as onsite retail winner.
And down the road, it looks like it's definitely going to be a brand new "bricks and clicks" world of retailing.
Who says Wal-Mart can't be all things to all of its customers? I wouldn't bet against them.
Thanks. Bob.
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