Those who are familiar with the popular CBS sitcom ‘The Big Bang Theory’ will probably agree with me when I say that if there is such a thing as a perfect foil for Sheldon Cooper, it is none other than Penny Hofstadter. We had previously likened Amazon to Sheldon, and in our opinion, if there is someone who can stand up to this giant and put up a worthy fight, it is the one and only Walmart, a classic Penny.
Tall, gorgeous and street-smart, she is the perfect counter to the brilliant Sheldon.
Walmart (WMT) is a retailer who holds a solid position in the industry. It has the size to hold its ground and the cash to make whatever move it has to in order to keep up with Amazon (AMZN). After all, it takes two to tango, and these two are matching each other’s steps with much aplomb.
Walmart has the offline or brick-and-mortar store presence that Amazon is yet to achieve, and Amazon has the online presence that Walmart has come to covet in today’s retail environment. Sheldon has his academic brilliance while Penny has her social skills.
Penny manages to knock Sheldon off his pedestal every once in a while, and that’s exactly what Walmart did to Amazon with its latest Flipkart deal.
Walmart’s $16 billion purchase of a 77% stake in Indian e-commerce company Flipkart has paved the way for the US retailer to enter a fast-growing market that holds immense potential in terms of e-commerce growth and digital penetration.
Flipkart commands a close to 40% share in the Indian e-commerce market with Amazon close behind at 31%. Now Walmart gets a piece of that big cake. It’s a smart deal.
However, the stock market didn’t take kindly to it and Walmart’s shares plunged following the deal. Analysts who have taken a closer look at the deal estimate that despite the short-term negative impact on earnings, in the event that Flipkart goes public, Walmart stands to gain significantly. So it looks like Walmart CEO Doug McMillon knew what he was doing.
Matching in strength
The first and best thing for any company, in any industry, to do is play to one’s core strengths. In Walmart’s case, it is the physical presence. Walmart has almost 5,000 stores in the US that are located close to the majority of the population. You can find a Walmart practically anywhere — a huge advantage over Amazon.
When it comes to groceries and perishables, Walmart’s stores give it an advantage. Walmart introduced many initiatives to increase convenience for customers. These included online orders and curbside pick-up at nearby stores, grocery pickup kiosks, and even having staff deliver online orders by paying them extra. Despite this, online grocery delivery remains a tough nut to crack, and Walmart still appears reliant on its stores in this respect.
Grocery delivery is an area in which Amazon too has been floundering about. Amazon’s grocery services AmazonFresh and Prime Now did not garner the desired response. Then came the Whole Foods acquisition. Amazon is experimenting with offers and discounts and delivery options as it continues to figure out the best way to maximize its benefits from Whole Foods and to succeed in the groceries department.
Walmart also launched free, two-day shipping without any membership fees, a move against Amazon’s Prime. Amazon started offering discounted Prime services to low-income customers to tackle Walmart. Thus, both Walmart and Amazon go on and on in their efforts to outdo each other.
Outdoing one another
After decades of building up a store chain stronghold, Walmart realized it needed to fortify itself by building an online presence. This drove several acquisitions like Jet.com, Bonobos, Modcloth, and now Flipkart. Walmart also sold a significant stake in its British grocery chain Asda, which indicates an intention to concentrate more on markets that have high growth potential and to withdraw from ones that are not up to the mark.
While Walmart has been walking down the red carpet with Flipkart these past few days, Amazon has been silently honing its skills to succeed in the physical world. Amazon rolled out its Amazon Experience Centers — sample smart homes with Alexa-enabled products, which were on display in 15 Lennar model homes.
Amazon has also partnered with Sears for the purchase, delivery, and installation of car tires. After succeeding in online sales in several categories, Amazon is now moving into the categories where online purchasing is not that prevalent. Auto parts, internet-connected devices, and home security systems are a few examples of such categories where people still need help in making their purchase decisions.
Amazon recognizes the importance of brick-and-mortar stores and the company is now attempting in its own way to build a physical presence to better cater to its customers and to capture more revenue and growth opportunities.
The retail sector can never be fully online or offline. It will always be a combination of both. The traditional stores will always be there, at least for the foreseeable future while e-commerce will continue its significant growth.
For now, Walmart and Amazon will have to exist side by side with each one playing to their strengths to win the customer. Like Sheldon and Penny had to learn to get along for the sake of Leonard. Walmart and Amazon are both formidable opponents and their dance for victory is likely to go on for a long time.