How Walmart and Amazon Transform Retail

The development of online sales channels naturally has an impact on retail. Classic offline retail who wants to grow their business in the digitalization era, it becomes impossible to ignore Internet technology. This trend is confirmed by recent events in the US retail market. In August of this year, the American offline trading giant Walmart acquired Jet.com, an online resource, to strengthen its position in the field of online commerce, where Amazon's e-commerce reigns.

In order to get a more complete picture of the impact of Walmart and Amazon’s technological opposition on online retail in general, we are in the processing company PayOnline studied the material prepared by a strategic adviser to top management of multinational companies in the field of payments and e-commerce.

Below we present to the attention of users Geektimes translation.

The Boston Red Sox and The New York Yankees rivalry is the most celebrated in American sports history.

It all started in 1919, when the Red Sox experienced problems and their owner sold the legendary outfielder of the Bab Root team , nicknamed “Bambino” Yankees, for 125 thousand dollars. The Yankees subsequently became the most successful baseball team in history, winning 27 World Series, and many team players hit the American baseball hall of fame. As for the Red Sox, their fans had to wait patiently and reverently for decades, until, finally, in 2004, the team did not get rid of the “curse” of Bambino, literally “pulling out” the World Series game against the Yankees, losing during the game from 0-3 in favor of the opponent and for the first time in 86 years he won the title again.

And today, 97 years later, the tickets for the match "Socks" and "Yankees" remain among the most coveted in baseball.

In retail, there is a similar, not so old, but equally serious rivalry: Amazon vs. Walmart .

It all started when the “flywheel of Amazon e-commerce” (the term coined by Jeff Bezos) spun and began to press down more and more of the online sales market. And the more formidable the Amazon became in retail, the more often observers began to oppose the online upstart and the world's largest traditional retailer.

Therefore, when Amazon for the first time in history surpassed Walmart, becoming the world leader in retail in terms of market capitalization, the media took the news in the same way that a bull perceives a red rag. Now, every step of the two companies becomes the subject of careful study and analysis: journalists look at Amazon against the background of a sharp increase in online sales, and Walmart - against the background of several years of continuously declining store sales.

So it comes as no surprise that when in August Walmart announced the acquisition of an online shopping resourceJet.com for 3.3 billion dollars, talk of competition came to a whole new level.

Jet engine for walmart

Now Walmart is the proud owner of the self-proclaimed title of "Amazon Killer". However, for the time being, Jet.com is doing in such a way that the company suffers losses of 30 cents from every dollar received. According to media reports, last year the company was faced with a choice: either to close or to find $ 554 million, although Jet.com denies this. The value of the company at that time was a little over $ 1 billion.


Founder Jet.com Mark Laure and employees of the company

August 18, Walmart presented a report on profit , following which it became clear that the company showed good financial results for the second quarter in a row after a series of losses, surpassing analysts' forecasts. Network Director Doug McMillan stated:

“The focus of our attention is still on the implementation of e-commerce opportunities around the world and the implementation of our plan to create a single, holistic sales channel, as evidenced by our recent alliance with JD.com in China and the agreement to acquire Jet.com in the US” .

Without any doubt, comparisons with the results of Amazon are inevitable, especially given the fact that Amazon once again showed excellent results , besides figures supported by a considerable number of plans and projects.

So, Amazon's revenue grew by 28.1% in the US and 30% globally. The company's trading floors account for 49% of all its sales, which is 7% more than in that year. Amazon today is making 60% of the total number of electronic sales, and this figure is steadily growing, showing an increase of 10.6% in the first half of the year and 14% over the period June-July.

Thus, the Jet.com deal should be some kind of saving grace designed to help Walmart in its attempts to regain its attractiveness in the field of e-commerce.

Retail Environment

To understand why we characterize the purchase of Jet.com this way, let's try to understand the difficult state of affairs of modern American retail.

Consumer spending rose by 4.2 percent - the best figure in two years, while gasoline prices are at their historical minimums. Nevertheless, the retail sales curve in July was as flat as a pancake, while in June it was slightly better. Instead of spending money on clothes and electronics, consumers buy cars and book travel. Dinners in restaurants, they also became less, and all thanks to grocery wars, as a result of which products also significantly cheaper. All that remains after the satisfaction of basic needs, Americans today prefer to spend on health care (expenses increased by 20%), better housing conditions and debt recovery.

As for consumer shopping habits, the changes go here.

According toeminent retail analyst RetailNext, physical store traffic in July fell by 5.8%, which, however, is not as bad as it was two months before. The July decline of 1.2% of the rate of purchases per visitor looked quite uncharacteristic, however. This was even more alarming, since throughout all previous months the rate of purchases per visitor grew even against the background of a general decline in attendance, and retailers remained calm, knowing that all this time they were selling more to fewer buyers. Whether it was a July anomaly, a simple statistical surge caused, according to some, Amazon Prime Day, distracted potential visitors, or was it only the beginning of bad news for retailers, time will tell.

The fact that even the fierce discounts that retailers have to offer so that consumers want to finally go through their front doors could not keep the average purchase rate from falling by 1.6% last month adds to the fire. Supermarkets are faced with an unprecedented drama: the price collapse continues against the background of how big players quarter by quarter report on the average five percent drop in sales. In an attempt to stop the leakage of money, brands close down shops, in some cases, right up to the complete elimination of all physical outlets.

And of course, the situation with supermarkets is repeated with suburban malls, which once provided at least half of the total number of retail sales in the years when Amazon was first born. And since the department stores located in them attract people to neighboring boutiques and shops, then after the fall in sales in the first ones, sales in neighboring trading floors also sank.

In general, sad times have come today in the "moll-villa".

In rich suburbs there is a similar situation. Demographic studies showthat the influx of people into the suburbs has decreased over the past 20 years, since many people prefer to live in an urban area where the necessary goods are located close and conveniently. It is not surprising that some of the most successful malls are located precisely in urban centers — in or near office buildings, near hotels or apartment buildings, that is, in the immediate vicinity of a large gathering of consumers or within walking distance of them.

Summing up, we can say that the picture for the physical retail looms not the most pleasant. Despite the fact that 90% of retail sales today fall on traditional storesThis advantage is quickly melting. Statistics have long shown that traditional retailers are losing their positions in large numbers, while online is growing rapidly in those key industries that once provided growth in physical retail sales. And this is due to the widespread availability of the Internet on mobile devices and the development of innovative marketplaces such as Amazon.

That is why all views are now focused on the two largest players in their fields - Amazon and Walmart - and their struggle for the retail market, the direction of development of which is now determined by consumers who want to get a new, different from the usual experience.

Comparing apples with apples

In 2015, Amazon reported receiving 107 billion dollars in revenue. Walmart’s equivalent was $ 485 billion, of which only 14 were from Walmart.com. From this we can say that the acquisition of Jet.com with its 2,400 merchants, 12 million merchandise, popularity among millenials and an average monthly website traffic of 22.6 million people is the basis of Walmart's strategy to curb Amazon.

It is worth noting that 55.9% of Amazon’s total revenue comes from Amazon Web Services. If you subtract this part, it turns out that the company's retail business fits into approximately 47.8 billion dollars.

This is certainly a considerable figure, moreover, is growing by leaps and bounds, and this is exactly what Walmart who ended up in the last two quarters cannot boast. And yet, if we talk about the retail market, then it is necessary to compare not 107 billion Amazon with 14 billion Walmart, but 48 billion Amazon with 485 billion Walmart. And that means Amazon’s revenue is only a tenth of Walmart’s.

So, with the situation on the playing field, everything is clear. Now let's see what the players do to win.

Blurry Retail Borders

Walmart, which accounts for 10% of all consumer money spent in the US, relies on the retail future, in which the company will become the largest all-channel supplier. A huge network of physical stores around the world and a sufficient amount of the desired range in them remains a fundamental element of this plan. In this sense, online is considered, firstly, as a channel to appeal to a new audience, secondly, as a means of making profit from the consumer’s desire to shop online and, thirdly, as a way to bring more customers to physical stores.

Taking into account the fact that American stores of Walmart are visited every week by 100 million people, one can say that the company managed to become the absolute leader in attendance among all US retail stores. Announcing the results of the first quarter, the company shocked everyone by reporting an increase in attendance by 1.5%, while all other retailers reported a drop in this indicator. It was the high attendance of stores that allowed the company to exceed the forecasts for the first quarter.


Queues at Walmart

This company explained the success by increasing the level of control over the assortment, which resulted in uninterrupted supply of goods. In addition, Walmart began to pay special attention to grocery departments and especially fresh food products. Today, the company's retail network provides25% of the total grocery sales in the United States, and this is one of his "flywheels", allowing people to lure into the store. Buyers come for groceries, and leave, having made several other, unplanned purchases. But the most important thing here, of course, is that they even go into the store.

Walmart also made sure that customers could just get to any of its points. Ninety percent of American consumers live within 10 miles, or 15 minutes from one of the stores, and the retail giant uses this proximity to experiment with various services like buy online, pick up in a store, including even such a service as pavement delivery. . And, of course, Walmart was one of the first retailers to offer buyers to place an order on walmart.com with the ability to pay for it in cash at one of the physical stores.

The acquisition of Jet.com is definitely aimed at enhancing Walmart.com. This transaction also allows Walmart to get a former Amazon employee who has worked in the company in a management position and has extensive experience in the field of e-commerce. All this will help Walmart replay Amazon in the style of the Amazon itself. In addition, the transaction opens Walmart access to the main chip Jet.com - an ingenious pricing algorithm that calculates the cost of a basket based on the number of products in the range and the proximity of delivery points to the buyer's address. Jet.com claims that the cost of the cart in their store can be as much as 10% lower than a similar order at Amazon, and this is music for Walmart’s ears.

It is also worth noting that Walmart has a whole network of hundreds of strategic support centers located at a distance of no more than 150 miles from any of the stores of the network and allowing you to quickly fill the lack of assortment. Perhaps a combination of Walmart's support centers, Jet.com pricing algorithms and offers to lower the price if the buyer, say, takes his order from the store or waits one hour until delivery arrives, can be an ideal alliance for the retail industry. The constant close proximity of the consumer to the chain's stores opens up many opportunities for both Walmart and Jet.com, as well as for their common customers. And access to Walmart's support centers gives Jet.com the ability to consolidate its product range into them,

They say that at the moment Jet.com will remain a separate site, but it’s easy to imagine a scenario in which every client can soon get an account on Walmart.com, and with it the opportunity to use mobile phones to make purchases in all stores of the network. Thus, Walmart can further blur the boundary between the physical and online retail, turning them into “just retail”.

Walmart may even rethink the concept of malls, inviting marketplace owners to become part of their retail ecosystem.

Amazon and its alternative view on retail

Amazon also considers a single holistic channel to be the future of retail, but the starting position from which the company begins its journey is seriously different from Walmart's “basic capital”.

First of all, the Amazon strategy involves capturing as much of the retail categories as possible that naturally fit into the online sales ecosystem and in which companies will easily compete with traditional stores. The trust of customers is gained by the brand with every click leading to a purchase. Books, electronics, sporting goods and clothing are all examples of categories in which traditional sales have essentially lost their positions, and the fact that Amazon is constantly gaining momentum in these categories can hardly be called completely random.

In addition to the online platform, the basis of the company's retail strategy is also provided by the introduction of Amazon Pay’s eponymous corporate payment method, whose buttons act as peculiar hooks that the company uses to attract buyers and merchants to engage them in the company's ecosystem. Amazon continues to expand its online market, engaging more and more retailers, while also developing its own brands and giving consumers more reasons to start and finish shopping in the company's ecosystem. In particular, in order to provide Prime participants with a new consumer experience, Amazon has expanded its activities to related areas, such as ordering and delivering meals. Among other things, we can mention Amazon Fresh and Pantry - the company's attempts to enter the grocery online sales market,


Amazon Fresh, food delivery

And there is Alexa with its ecosystem and 1900 currently available skills to make purchases with one voice command. Alexa is getting smarter and starts to respond better to the context. She already knows how to remember past orders and simplify regular purchases, of course, provided that they are made at the company's site. The latter circumstance, however, is not such a serious problem given the fact that an increasing number of retailers, such as Domino's, 1-800-Flowers and Uber, are also beginning to be friends with Alexa.

An important role in the process is played by the well-known and time-tested button Pay-with-Amazon. At the sites of the company itself, it allows you to make purchases in one click. On the sites of friendly merchants, she, according to company representatives, offers something more valuable for a mobile client: the experience of simplified ordering. Authorization on the merchant’s Amazon Pay website is done using Amazon credentials, so the order is sent instantly, without having to enter any information, such as when paying for the trip automatically, when the customer leaves the Uber machine. Amazon also claims that its purchase button gives retailers information about what customers have been doing since they entered the site and other information that was so useful but not available in the past.

So when Amazon thinks about blurring the boundaries between the physical and online retailers, it chooses a smoother approach, relying on the continuous provision of goods purchased online on its marketplace, using Pay-with-Amazon as a way to expand its ecosystem through online merchants wanting to increase online conversion and perhaps offer their customers a new buying experience in a physical store. Many multichannel retailers effectively use Amazon's supply centers, giving customers the opportunity to make purchases online and pick up orders from stores on the same day or make orders in the store and receive it within one day or even an hour.

In addition to the time-tested innovative ideas, Amazon has a very fresh one.

Amazon's Seattle bookstore is one such idea - it serves as a kind of Petri dish, with which the company is experimenting on the mechanisms of physical retail stores, trying to rethink them. The entire range presented in the store can be purchased using the Pay-with-Amazon application. At the same time, there are no visible prices anywhere: to find out how much this or that product costs, the buyer needs to open the Amazon application and scan the bar code on the shelf. In the same way, the visitor learns additional information about the purchase, and also receives related recommendations. It is possible that in the future this list will be replenished with other information elements based on the availability of the selected product and the rich purchase history collected by the company over the entire period of its existence.

Amazon announces its plans to open other bookstores and has an aggressive policy of opening supply centers throughout the country in order to reduce the cost of transporting goods and speeding up delivery. In 2014, the company signed a 17-year lease for almost 44 thousand square meters of land on the other side of the Empire State Building. Last month, she rented about 56,000 square meters in Teterboro, New Jersey, 15 minutes from Manhattan. It is also said that Amazon plans to open a mixed retail and bookstore in the large-scale New York complex Hudson Yards , when it will be completed in 2024.


Amazon Bookstore

Therefore, Amazon’s plans to rethink retail and capture its share in it begin with the application of all the accumulated digital data about consumers - how they make purchases and what they buy. Entering the company offline, both independently and with the help of third-party partners, will continue to be followed by using this base to transfer existing digital retail experience to physical stores, linked together by a bright yellow Pay-with-Amazon button.

In addition, Amazon could also rethink the concept of malls by linking their key premises with their supply centers and turning them into showcases for their products. This would allow visitors to be returned to huge retail centers, breathing new life into traditional retail.

Decisive moment

It is always interesting to watch and discuss sports competitions, because the balance of power between the two great teams is constantly changing, and it is impossible to say for sure which of them will win this time. Despite the fact that The Red Sox had to forget about winning the World Series for 86 years, they, however, won a lot of victories in each season, simultaneously winning the title of American League champions . After winning the World Series in 2004, in 2012 they had one of the worst seasons in history, but in 2013 they won the series again. Now they are a few games ahead of the Yankees, but still far from the end of the season, so it’s too early to guess who will win.

And even though the Yankees won a victory in the World Series as many as 27 times, they also experienced many ups and downs. The 1966 season ended the team in 10th place, as a result of which the fans turned away from the Yankees: in the last game of the season, held in their own Yankee Stadium, only 413 places were occupied.

But in Boston the stands are always full, it doesn't matter if the “socks” win or lose. It is interesting to watch the rivalry between Amazon and Walmart primarily because both retail giants come into play with their own advantages and disadvantages. And each season is accompanied by its own ups and downs, such as, for example, the Amazon Fire Phone. However, in the end, the most important thing is what we will see in the long term, that is, what the retail sales area will look like in the next decade, and how much the process of shopping today will change by that time. And here everything will depend on how well the retail giants play.

In connection with the releasePayOnline module for E-Commerce, QuickShop and WooCommerce CMS WordPress plugins, we were interested in learning how plugins for a similar platform are implemented in Amazon and Walmart. Both Walmart and Amazon are actively using an affiliate network as a sales channel, and for this purpose they have developed their own CMS WordPress plugins. According to W3Techs, 26.1% of all websites in the world are WordPress-based.

Use the plugin WordPress Walmart are a company registeredas retailer partners. The solution gives the online store access to more than 6 million Walmart product lines. The plugin allows you to create links through which customers can pay for goods of the retail giant directly from the site of an online partner. All transaction data is available to users of the plugin thanks to a special reporting platform. In the WordPress plugins directory, a partner can select and customize one of the 6 Walmart plug-in templates.

Amazon WordPress Pluginallows e-commerce giant partners to add links to Amazon products in their posts or on the pages of a WordPress resource. Product links can be presented in text format, in the form of thumbnails or full-size images, as complex templates or full-scale flash widgets. Product links are suitable for any of the domains of Amazon (UK, USA, Brazil, Canada, China, Germany, Spain, France, Italy, India and Japan). The description for assortment positions can either be entered manually by the user, or dynamically updated directly from the main Amazon site in accordance with the language of a particular domain zone. All commodity links contain an Amazon affiliate ID, allowing the site owner to receive remuneration due to him for product sales.Amazon Web Services .

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