Feeding frenzy: As Amazon and Walmart get hungrier, the industry wonders what’s next

10/18/2017

Can other retailers find a comfortable — and profitable — niche in the marketplace, while Amazon.com and Walmart go toe-to-toe in their seemingly endless battle for retail supremacy?



The answer will not only define retail for the next generation or two, but also determine who will survive what many call the “new normal” in what is becoming a more complex and risky arena.



There is no hiding the fact that Walmart and Amazon are locked in a vicious campaign for the hearts, minds and wallets of the consumer. Each is taking strategic steps to become better merchandisers in the other’s space. Walmart’s $3 billion-plus acquisition of Jet.com last year, as well as other moves into e-commerce, shows that the Bentonville, Ark.-based chain is serious about learning as much as it can about e-commerce merchandising as quickly as possible.



“Walmart is getting its mojo back,” said Jim Wisner, president of Chicago-based Wisner Marketing Group. “The company has learned a lot from Jet and is accelerating its online performance to better interact with its thousands of physical locations. The company is definitely leveraging its relationships with manufacturers to build its e-commerce business.”




Amazon is not sitting still either. Its $13.4-billion purchase of Whole Foods this summer just confirms that the Seattle-based company is committed to being a serious player in just about every segment of the retail world — online and through traditional storefronts. And, many industry observers say they would not be shocked if Amazon followed up on its last purchase with another blockbuster, this time possibly a drug store chain or pharmacy distributor to close Walmart’s lead in that extremely profitable segment.



“It’s all about gaining distribution points,” said Ken Morris, a principal at Boston Retail Partners. “One big reason Amazon bought Whole Foods is to get what, in essence, are distribution centers across the country. About 90% of the population lives within 10 miles of a Walmart store. Think about what this will mean for same-day shipping.”



Where does all this activity by these two companies leave other retailers in the field?



Opinions may vary on pricing and selection strategies, but most industry officials stress that knowing as much about your potential consumer is vital for survival in the marketplace.



“Let the two gorillas in the room fight it out among themselves,” said Farla Efros, president of Toronto-based HRC Retail Advisory. “Stay the course. Going head on with them would be like chasing a ghost. Other retailers need to carve out a niche that emphasizes unique products and service. They need to spend more time learning who their shoppers are and what they can do for them.”



Morris feels that other merchants need to be more aggressive in their approach. While agreeing that retailers need to carve out a niche and understand their customers’ demands, he said that they must also make shopping a more entertaining experience.



“If you are just going to sell a commodity, these guys are going to eat you up,” he said. “Entertainment is the key. Retailers have to make their stores more fun and exciting, and convince consumers that they actually want to come into the store. That will especially be true for the malls, where more entertainment venues like restaurants, movies and bowling alleys will attract consumers.”



Phil Lempert, a Santa Monica, Calif.-based retail analyst, said there is a silver lining for other retailers, especially with Amazon’s recent acquisition. “Suddenly everyone wants to work in retail,” he said. “The Whole Foods deal made retail an attractive employment alternative for many Silicon Valley types. They are going to join retailers and bring new ideas that will help them understand shoppers better and bring more of them to the store or their websites. They are going to help rethink the overall shopping experience.”



In the end, it is going to come down to customer loyalty, and everyone agrees that is a fleeting thing. “Retailers are going to have to get their shoppers hooked on what they offer, including their own store brands,” said Wisner. “They are going to have to stay up on everything to make sure they offer shoppers what they want, when they want it and at a fair price. It is not going to get any easier for anyone.”


X
This ad will auto-close in 10 seconds