Wal-Mart/Amazon Case Study Assignment

Wal-Mart/Amazon Case Study Assignment

Comparative Advantages

A primary comparative advantage by Wal-Mart is its leverage in the food and grocery category that remains instrumental in the success of its Omni-channel strategy. In 2018, the company was the top grocery retailer in America, pocketing at least 146 billion dollars in food and grocery sales, which translates to 21.1% of the grocery market (Casadesus-Masanell & Elterman, 2019). Amazon emerged as a frontrunner in e-commerce for general merchandize but has failed to make progress in grocery delivery and pickup. Grocery is the second largest traded retail product after automobiles, but also the least penetrated market by e-commerce. Apart from Wal-Mart, Amazon’s primary comparative advantage is its strong online presence. The company began as an online bookseller in 1994 to become the largest bookseller in the globe. Immediately, Casadesus-Masanell & Elterman (2019) argue Amazon was becoming an online retail giant following numerous launches, acquisitions, and incentives in subsequent years such as zShops, Amazon Web Services (AWS), Echo, Chase, and Prime Rewards amongst others. Owing to its strong online presence, 41% of American digital customers began their internet searches and made final purchases on Amazon. In comparison, 28% started their searches on Google and made final purchases on Amazon in 2018 (Casadesus-Masanell & Elterman, 2019).

Strategic Interaction

The Wal-Mart top management decided to introduce e-commerce to maximize the company’s promise of serving its customers no matter what, when, or how. As a result, adding e-commerce was a way of gaining ground in its food and grocery segment owing to the evolution of technology and penetration of the grocery market by e-commerce giants such as Amazon. Wal-Mart created an online market segment in 2009 but was hesitant to grow its third-party provisions; thus, online presence declined (Casadesus-Masanell & Elterman, 2019). As a result, it re-introduced it as a way to maintain its control of the food and grocery market in the United States. However, Amazon’s decision to have a brick-and-mortar grocery presence was influenced by the need to offer an experiential experience to grocery shoppers. The sale of general merchandize was successful online, but for groceries, the customers had different tastes and preferences that could not be addressed using online services. As a result, Amazon purchased Whole Foods to penetrate the food and grocery market in the U.S at the expense of Wal-Mart (Casadesus-Masanell & Elterman, 2019).

Customer Profile and Pay-offs

The pay-off from the strategic decision by Wal-Mart to enter online retailing will depend on its success in targeting the millennial generation. Currently, at least 30% and 34% of online shoppers are Generations Y and X, who prefer digital channels for convenience, lower prices, and time-saving (Casadesus-Masanell & Elterman, 2019). For instance, Wal-Mart introduced Jetblack, which is a beta version service for its customers. The innovation allowed voice message or text message ordering, as a way of attracting the young, affluent, and urban customers living in large metropolitan cities, including San Francisco, New York, and Chicago. However, Amazon’s pay-off will also depend on its ability to provide an experiential shopping experience to its customers. However, a consumer survey in 2017 demonstrated that 76.4%, 14.3%, and 11.1%  of online shoppers favored home shipping to in-store pick-up, favored in-store pick up, and did not shop online at all respectively (Casadesus-Masanell & Elterman, 2019). As a result, acquiring brick-and-mortar grocery stores should consider the time taken to make deliveries. The company targets Generation X and baby boomers from rural markets across the U.S. Since Whole Food stores are relatively located further from customers compared to Wal-Mart stores, customers will prefer purchases from the latter than the former.

Brick and Mortar and Online Presence

Amazon and Wal-Mart are convinced that having brick-and-mortar grocery stores and online grocery stores, respectively, will help to win the food and grocery market, which is the next battlefront in e-commerce. Grocery is the second-largest retail category in America despite being the least penetrated category by e-commerce. By acquiring physical stores, Amazon seeks to boost the experiential shopping experiences of grocery shoppers to increase sales. At the same time, Wal-Mart established an online grocery presence to promote the shopping experiences of its customers, which is likely to succeed than Amazon’s strategy.

Reference

Casadesus-Masanell, R., & Elterman, K. (2019). Walmart’s Omnichannel Strategy: Revolution

or Miscalculation?. Harvard Business School.