The Clash Of The Giant In The Modern Day Business
Frank Lee
MGT605
MGT605 Organizational Management and Leadership
National University
Professor Harvey McDonald
10/28/2018
Abstract
The following paper is a narrative process that explains the differences between Amazon and Walmart business model that applied the open and rational system that derived from Master Manager and great lecture from professor Harver McDonald. This paper also addresses the problems faced from a small business that needs to adapt and changes from these big companies.
Keywords: Armitage, AMAZON, WALMART, OPEN, RATIONAL, ANALYSIS, LESSON LEARN, SOLUTION
Table of Contents
TOC o “1-3” h z u Introduction PAGEREF _Toc528527225 h 3Analysis PAGEREF _Toc528527226 h 4Lesson Learn PAGEREF _Toc528527227 h 10Solution PAGEREF _Toc528527228 h 11Reflection PAGEREF _Toc528527229 h 12References PAGEREF _Toc528527230 h 13
IntroductionThe Amazon and Walmart, the clash of the giant in the modern-day business that can often create more smaller retailers going out of business. Walmart dominates the retail, while Amazon dominates the online business, both take the lead in one side of retail. The rise and fall of these companies will have a significant consequence on the local and global economy on a large scale since the fall of dot-com phenomenal in 1999. So instead of helping to create new opportunities, and boots the stock market, it might have damaged the fabric of traditional local businesses in the long run. We need to understand and prepare for such unintended consequences. Whether local business and retailers embrace these influences or open to adapt, these changes are inevitable.
Problem Statement
The Walmart empire began with at least 5 thousand retail stores in the United States since 1962 to 11,718 stores worldwide and remains the largest retailer in the world in 2017. Walmart’s revenue growth was in the range of 25%. In 2017, Walmart recorded sales of $485 billion and made a profit of $13 billion. Amazon recorded sales of $178 billion for a profit of $3 billion (https://www.forbes.com, 2018).
Likewise, Amazon and Walmart are battling to become the first company to reach trillions of dollars. Amazon’s stock market value reached $900 billion for the first time since posting its Prime membership. Walmart has a business value of $288 billion. Meanwhile, Amazon’s logistics costs are rising. In 2017, the shipping costs were 12% of Amazon’s net revenue, while operating expenses were 14% of net sales (Statista, 2018).
The question is, how the small retailers and business would cope with the aggressive business expansion from this two giants? What will they see and learn from what Amazon and Walmart have been doing?
AnalysisWe will break down several areas where Amazon and Walmart directly compete in which the Open and Ration Model have been utilized here (Robert E. Quinn, 2015). The system applied thought several programs which promote innovation, external collaboration, and profitability. These programs are Loyalty programs, Repurchase, Click and Crawl, Business Acquisition, Shopping with Artificial Intelligent
Loyalty programs
Amazon’s main profitable program such as prime now has 100 million members. It has been doing well 13 years since Amazon launched Prime in 2017, Amazon has added more Prime members than any previous year and shipped more than 5 billion items through worldwide service as the Prime members get free two-day shipping on over 100 million different items). Also, this year, its acquisition of Whole Foods Market closed its rewards program, and now Prime members nationwide receive a 10% discount on Whole Foods Market, coupled with continuous weekly discounts on some items are the best sellers (Amazon, 2018).
Walmart has some incentive schemes in place for its credit card partners; it does not offer a loyalty program in the traditional sense. Perhaps the closest comparison with Amazon Prime is Sam’s Club retailer with 600 stores, priced between $45 and $100 a year, and offers shoppers a minimum of free shipping. Walmart is considering launching its online video subscription service to compete with Amazon Prime Video and Netflix, according to recent reports. Big retailers are considering a service that costs less than $8 a month, while Amazon charges $8.99 a month for the Prime service, which included with Amazon Prime members for $12 per month.
One-way Walmart can compete with Amazon in the future will be to finally connect such members in a similar way that Amazon offers a heap of benefits to its Prime members (Walmart Bloomberg Report, 2018).
Business Acquisition
Amazon’s biggest news last year was Amazon’s purchase of Whole Foods for $13.7 billion and a leap into brick and mortar groceries. More recently, Amazon has generated information on the $1 billion Pill Pack purchase, a drugstore that supplies drugs in pre-packaged dosage, dispatch, and renewal, and ensures timely delivery. They indeed adapted Pill Pack old’s visionary team has a combination of broad experience and a focus on technology. Pill Pack also owns pharmaceutical licenses in all states, which may be the driving force behind the buyout. This transaction also provides Amazon data for analytics. Other Amazon acquisitions include Zappos Footwear and Clothing Retailer, Audile’s audiobook leader, and smart doorbell manufacturer, among many others.
To encounter, Walmart may be prepared to carry out its healthcare acquisitions. This month, Walmart explores Humana’s former vice president of innovation, Sean Slivinski, to run its healthcare and healthcare unit, according to Bloomberg. The health insurance company and Walmart had preliminary talks to develop closer cooperation. However, the latest acquisition to gain news is a $15 billion deal by Walmart to buy Indian e-commerce company Flipkart, and they beat Amazon’s with the same pursue. The list of Walmart acquisitions took place a long list, including Jet, Bonobos, and Parcel. Where Jet is a discounted player offering bonuses to customers with greater savings when their purchases increase, Bonobos is a premium retailer offering high-end fashion for men. Combined with Mod Cloth women’s fashion retailer, a purchase made through Jet.com, this move is a step into a premium segment outside the traditional Walmart market. Walmart also bought Zappos competitors Shoebuy.com and Moosejaw, a major e-commerce retailer of outdoor equipment and activewear. Walmart purchased the parcel delivery company in Brooklyn in 2017, a one-day delivery company, and finally distributes perishable and non-perishables to customers in New York City (Walmart, 2018).
Click and Crawl
Walmart items show Free Pickup on its website available within four hours. Walmart also offers discounts on certain items and adds 500 pickup locations to stores nationwide; this could reach 700 by the end of 2018. The high-tech vending machines have completed more than half a million orders since its first introduction. Moreover, all the new Pickup Towers upgraded, and they will be enhanced with Pickup Lockers for major items after Walmart discovers shoppers who want to shop online and pick up more significant items, such as television.
Amazon also offers the same day pickup. Eligible items received on the same day for free have the “Pick it up today” notice below the price on Amazon.com. Amazon locations provided with live support staff and self-service kiosks. Also, Amazon lockers are growing in number, expanding into Whole Foods Market stores and motivating shoppers the opportunity also to buy groceries while taking packages. Amazon’s Hub, a distribution solution for the flat, is also available for installation nationwide today. More than 500,000 residents already have access to the Hub, which works for delivery from any sender, not just Amazon. (Amazon Bloomberg Report, 2018)
Grocery shopping
Currently, Walmart has over 1,400 stores with online grocery stores. This service will enable customers who order groceries online and pick them up at Walmart stores without leaving their cars. Shoppers can place orders through a mobile website or app, pick up a time to pick up their orders, park at one of the designated online grocery parking lots, and enter the number. Assigned to call to notify associate employees. Orders are retrieved and sent to the vehicle in minutes.
Walmart also wants to expand online grocery delivery to more than 40% of the US household. The business will serve more than 100 metropolitan areas, and Walmart will use more than 800 stores to carry orders. Grocery stores can deliver as fast as the same day and customers place orders online via Walmart’s mobile App. This service is $9.95 and must have a minimum order of $30. Packaging events estimated that 59% of grocery buyers had bought groceries from Walmart in the past three months, with 58% buying at the store and 5% buying online. Similarly, about 9% of grocery buyers have bought groceries online from Amazon.
Bloomberg reports that the largest retailer in the world is also the largest grocery store, earning nearly $160 billion in annual groceries. Walmart’s share of food and beverages in the United States is 17.3% (Statista, 2018).
Amazon’s online grocery market share stands at 18% in the United States, according to One Click Retail, with sales of food and beverages worth $2billion. According to reports, Amazon Fresh’s weekly sales have more than doubled from last year, rising from $3 to more than $7 million by the end of 2017 to reach an estimated $350 million.
As a result, Spitzer Millersburg, managing director of One Click Retail want Amazon growth at the end of 2017 will undoubtedly have a significant impact on sales beyond 2018, that why they purchased Whole Foods. This impact has been primarily in the United States. Amazon’s Fresh is a grocery delivery and delivery service dedicated to government members in several cities. Government members can get the benefits of Amazon Fresh for an additional monthly membership fee of $14.99 (Amazon Bloomberg Report, 2018).
Amazon and Whole Foods Market have launched products from Whole Foods Market through Prime Now in 19 cities, with more than 2018. In June, the service expands to Chicago, Houston, Indianapolis, Minneapolis, and San Francisco. Antonio. The service launched earlier this year allows consumers to buy from Whole Foods Market’s selection at using the Prime Now app. Government members can purchase thousands of items for delivery in at least an hour, daily from 8 am to 10 pm. Official members can receive ultrafast delivery service at no additional cost.
If the customer lives in a big American metropolis, the question is not if, but when Amazon’s Whole Foods delivery will get customers there. Despite the process that Amazon is using to expand its integration with Whole Foods, it will not be long after the two brands operate simultaneously across the country.
Shopping with Artificial Intelligent
In September, Walmart integrates with Google to provide available items for voice shopping through Google’s assistant. With smartphone shoppers on Google Home, they can link their Walmart account to Google Express. Express is a shopping service that allows Walmart customers to shop around the web, their apps, and their voices. Google facilitates the process of shopping, ordering, and payment, and Walmart completes the order. There are over 2 million items, and customers can still use Walmart’s two-day free delivery service with voice shopping capabilities.
Walmart has also incorporated its Easy Reorder feature into Google Express to offer personalized voice shopping recommendations. Google Express will pull shoppers’ order history from the Walmart website, and the Assistant feature will recommend items that were purchased earlier while they were shopping. Express will also pull shopping history from traditional Walmart stores if shoppers use the same credit card in-store and onWalmart.com and Google Express. Walmart will soon add the option to accept orders in the store or use voice shopping to buy fresh groceries across the country (Walmart Bloomberg Report, 2018).
Amazon is well on its way to penetrating homes with devices such as Echo, which allows users to interact with Alexa’s voice assistant and perform tasks such as word-of-mouth. The technology giants leading the virtual artificial intelligence space in the US and Amazon are leading the way. Echo of the Amazon has penetrated 10% of homes in the United States; Google’s home page is 4%, while Microsoft’s Cortana follows at 2%. Members of Amazon Prime can request Alexa to order millions of Prime qualifying items. Alexa will also find items that shoppers have bought before to return. If a buyer does not purchase the item they are requesting Alexa before, Alexa can recommend the Amazon Choice products, which are highly rated, priced well with Prime shipping.
Products that achieve Amazon opt status often see sales increase more than three times. Losing Amazon’s Select status often results in a 30% drop in revenue. Products frequently change about 4-5% per day due to issues of speed of delivery or delivery. However, Amazon maintains consumer purchasing decisions, with 85% of consumers choosing the products Amazon recommends (Statista, 2018).
Lesson Learn
In 2017, the loss of Amazon’s international e-commerce activity has overshadowed North American companies’ operating profits, while Amazon Web Services has operating income in 2017 of $4.33B with sales of $17.46 billion. So annually, all of Amazon’s operating income comes from Amazon Web Services. In a nutshell, Walmart is close to being a billion-dollar company if measured by revenue and Amazon is closer if measured by price.
In the broader local context, retailers are catching up with Walmart. Now they have focused on trying to catch up with Amazon. Amazon is the leader of e-commerce. Walmart’s challenge is to bring its stores and supply chain culture and compete with Amazon. Walmart’s acquisition of Jet is a turning point for the traditional brick company. Similarly, the full purchase of Amazon’s Food Market placed the company quickly into traditional space.
When two of these businesses move forward, one thing is clear. Walmart does not back up and continues to try to fix its position at a high level in the new era of e-commerce retail. This month Walmart revealed that it had signed a five-year deal with Microsoft, which will allow Walmart to fully utilize Microsoft’s cloud solutions, such as Azure and 365 cloud services. The deal will also bring these two companies Working together on new projects in machine learning, artificial intelligence and data platforms that enhance the ability to optimize the store experience.
So, whether the business model combined with the agile cloud platform or leveraging computers and artificial intelligence to work smarter, business will be a reliable partner in accelerating innovation potential in combination between technology and retail business as the result of open business (Robert E. Quinn, 2015).
These company certainly learned from each other. Amazon’s official membership program reached 100 million members. Subsequently, Walmart seeks to integrate its digital and e-commerce, this move is a big step forward in the changing consumer business. They both invested openly in technology, and customers focus. They listen to their essential partner and certainly know how to not only know handle information overload but pass that burden cleverly to their customers and small business.
SolutionAs we can see, the innovated and embraced opened market retail methodology from Walmart and Amazon kicked off the economy on the rise. Walmart has excellent business locations, and Amazon combines speed with dynamic of products. Many companies have dealt with this and have adapted and changed. Netflix, Uber, Microsoft or even Apple. Instead of seeing the destruction, they collaborated and inserted themselves into the business process where they can still compete yet gain profit. However, this comes with brutal reality, Walmart destroyed traditional retail stores on its momentum and Amazon destroyed its traditional retail on its rise. In 1982, they sold 3% and earned 50 cents for every dollar of new sales. Amazon is 20 years old, it receives 3% of sales, and it receives 35 cents per new dollar of sales. In order to survive such a brutal reality and powerful companies, a small business must find a way to connect dots between products, consumers and retailers just like Microsoft and Apple have been doing (Robert E. Quinn, 2015).
ReflectionThere is no clear winner between these great American allies. Walmart is a bit slow in technology application, but eventually, they will catch up. Amazon has the edge early, but they will slow down when they encounter the same problem Walmart has done in the past, and that is retailing physical location. The obvious winner here is the courage and willingness to accommodate both companies willing to change, adapt, and invest the right technology with a clear vision for profit. Subsequently, this could provide an excellent opportunity for local businesses where they also adapt and interject their process to line up the two giants’ direction, and mostly to survive, coexist and be suitable.
ReferencesAmazon. (2018). Retrieved from https://www.amazon.com/
Amazon Bloomberg Report. (2018). Retrieved from https://www.bloomberg.com/quote/AMZN:US
https://www.forbes.com. (2018). Retrieved from https://www.forbes.com/companies/amazon/#bfa418e6fb89
Robert E. Quinn, M. M. (2015). Becoming a Master Manager. New York: Wiley.
Statista. (2018). Retrieved from https://www.statista.com/
Walmart. (n.d.). Retrieved from 2018: https://www.walmart.com/
Walmart Bloomberg Report. (n.d.). Retrieved from https://www.bloomberg.com/search?query=walmart
