Walmart and Microsoft unite to fight Amazon
The world's largest retailer - American Walmart - has entered into an agreement with Microsoft. According to him, companies become strategic partners. Microsoft will help Walmart with the development of new technologies, provide it with its cloud services and open for it its groundwork on artificial intelligence. In response, Walmart will pour into Microsoft several billions of its (deep) pockets, and give it a platform for hi-tech experiments in wide retail. Thus, experts say, companies are joining forces to fight against the common, formidable enemy - Amazon.
Both Microsoft and Walmart compete with Amazon - each in its own market. Bill Gates company fights Jeff Bezos on the cloud services field, exposing his Azure system against AWS. The gap between them is solid. AWS began to work 6 years earlier, and many state agencies now rely on it. US structures, which brings non-sick contracts to the service. As a result, Amazon Web Services accounts for more than 30% of the market, and Microsoft Azure is only 15% (although in terms of revenue for both platforms, it is now about $ 6– $ 7 billion per quarter - because Amazon is used to reinvest everything). Microsoft doesn’t catch up with the competitor itself. But if such a huge corporation as Walmart, with its 11,700 stores, starts building its cloud infrastructure on Azure, the gap will be quickly reduced.
Walmart suffers from Amazon dominance even more. The company understands that the future is in online retail, but that year has been unable to break into the e-commerce market. An entire generation of Americans has grown up who are used to associating any online purchases with Amazon.com, and they see no reason to go to a nearby Walmart. As a result, the company's online sales still account for less than 9% of all profits, despite the company's billions in investments in this industry.
What is worse - the offline sales market seems to have already begun to wind down. At the end of 2017, Walmart received $ 2.17 billion of net income - instead of $ 3.76 billion a year earlier. And when Amazon last June bought Whole Foods, a chain of organic food stores, shares of all major US supermarket chains lost up to 20% in a few days, including Walmart. Investors were afraid that, having come into the sphere of traditional sales, Amazon could squeeze out all competitors, as it had already done in other profitable areas.
Amazon now accounts for 49% of all American online retail. This is seriously concerned about all other companies and organizations - including eBay, and Google, and even the US government . And Walmart is so afraid of its main rival that it even spent $ 15 billion on the purchase of Flipkart in India - as they explicitly say, “so that this market does not get to Jeff Bezos”. Amazon has only American friends in its friends, who for several years called it their favorite company .
We have customers from Russia, too, more than half of their purchases in the US are through Amazon. Everyone forgot about eBay . And it seems that no one has heard of Walmart, they don’t talk about it, even 6PM and Zappos have more orders. Companies need to hurry - or it risks remaining in the dustbin of history, despite its offline dimensions.
The store pours a lot of money into e-commerce, and it has some success. Sales at Walmart.com increased by 23% last year. But this is also not a big reason for glee: over the same period, Amazon added 40%! In order not to lose, Walmart hopes to “give out” at least 40% by 2019, otherwise, “what's the point.” At the end of May, the company radically updated its website, and added several programs to increase customer loyalty. A strategic partnership with Microsoft might help with the rest.
After the retail giant on Tuesday announced the start of such cooperation, the company's shares immediately rose to three points. A five-year agreement suggests using all Microsoft cloud and AI solutions to make purchases at Walmart faster, easier, and even cheaper. For example, Microsoft has been developing trading technologies in stores that lack cashiers and cash registers for several years — to fight Amazon Go . These customer tracking technologies will now begin to develop on the basis of Walmart supermarkets - which, potentially, will help stop Amazon’s promotion in the offline retail market. To do this, Microsoft has already lured away to her computer vision specialist from Amazon.
Also, by agreement, much of the data from Walmart.com and SamsClub.com will switch to Azure, plus Walmart will start using the Microsoft 365 service package. The largest supermarket chain also promises to double its activity in the e-commerce market, because the company’s management believes that with the full support of Bill Gates' brainchild, they have every chance of gradually dragging the rope from Amazon.
The fact that competition with the main online store has become the main driver of the new partnership is told by Microsoft CEO Satya Nadella in an interview with the Wall Street Journal. According to him, “We have two organizations, each is an expert in their field, and we thought, why don't we combine our efforts and investments in order to overtake the competitors”.
Clay Johnson, CIO and executive vice president of Walmart, outlined the expectations of the world's largest retailer from a partnership with Microsoft:
It’s time for us to speed up our digital transformation. Innovations of the new century have become very important for 2 million of our partners around the world - the ecosystem of customers, shops, distribution centers and suppliers. They want mobility, analytics, predictive analytics and the Internet of things - in stores and in everything they do. Everyone now wants to be able to work with the data. Our association with Microsoft will allow this to be achieved.
Other advantages of building a global Walmart IoT platform on Azure also include, for example, connecting HVAC devices and refrigeration units to the Internet for smart management and drastically reducing power consumption in thousands of stores. Or help machine learning in building optimal routes for tens of thousands of trucks that deliver goods to supermarkets.
The merger of many large corporations against Amazon has so far no visible effect on the most famous online store. It continues to expand at an insane pace. The other day he had Prime Day - a day of massive discounts within one site. That all glory was not got to the competitor, Walmart and Target on the same day, on July 17, arranged the big actions - with similar products and sometimes even more substantial discounts. Nevertheless, Amazon’s Prime Day this year exceeded all expectations: in one day, store users made over 100 million purchases (and continue to make them while some offers remain ).
On such news yesterday, the store reached a record value of $ 900 billion. This year alone, Amazon’s value has already increased by 57%, and now experts believe that it may well beat Apple in the race to $ 1 trillion. Well, Jeff Bezos broke another record, becoming the first person in history, whose fortune exceeded $ 150 billion (now - $ 151.4 billion). Microsoft founder Bill Gates with $ 94 billion remains on the second line. The heirs of the Walmart empire, the Walton family, all have a total capital of $ 147 billion.