Many brand-side ecommerce leaders have voraciously consumed the many books about Amazon
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But few books in recent years cover the story of Walmart
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Jason Del Rey, a business journalist, has covered Amazon, Walmart and the ecommerce industry for the past decade, and had both the history, access, and foresight to discover and share one of the most interesting business sagas of our time. A story that is still unfolding today.
Winner Sells All: Amazon, Walmart, and the Battle for Our Wallets, Del Rey’s first book, launched today.
I spoke with Del Rey about some of the key themes from the book as it relates to the brands who sell on or to these retailers. This conversation has been edited for clarity and brevity.
Amazon and Walmart have waged a decades-long battle for online retail dominance, as told in a new … [+]
The story that hadn’t been told
“There are a lot of great journalists covering ecommerce a lot of great journalists covering retail,” Del Rey says of his interest in the topic.
“But there have been few that have paid close attention to both Amazon and Walmart in a deep journalistic way over the past decade. Going deep inside the rivalry between the two was not something that I had come across.”
Indeed, many readers who follow the ecommerce industry closely will be familiar with fellow journalist Brad Stone’s book The Everything Store, which covered in great detail the founding and eventual emergence of Amazon as a retail kingpin. But there hadn’t been a widely-read, Walmart-focused book for almost two decades, Del Rey said.
“I’m thinking of one book called The Walmart Effect which was published in 2006. I don’t think the word Amazon was mentioned in that book,” Del Rey said. “But I’m sure people are going to say similar things about my book I’m sure a decade from now.”
The Innovator’s Dilemma
Walmarts sophistication with operating profitable stores is unmatched. But this has also led to a big dose of hubris from Walmart, and an incidence of the ‘Innovator’s Dilemma’ – the phenomenon where there is a disincentive for a company to go after new, less profitable markets which may cannibalize their existing, profitable markets.
This led to Walmart de-prioritizing ecommerce, which was far less profitable, in favor of its core stores business.
Winner Sells All shares an example when Walmart’s e-commerce staff heavily discounted a basketball hoop that had been a top seller in stores for Black Friday weekend. As a result, the online sales began cannibalizing in-store sales and caused a major internal dustup.
Del Rey shares how over many years, the store and ecommerce divisions were at odds with each other. The ecommerce market as a new, high-growth (but less profitable) market that was continually hamstrung by the profitable store business, which benefited from strong leaders with incentives that didn’t reward ecommerce growth.
I asked Del Rey whether Amazon faces an innovator’s dilemma of its own today, with new and old rivals like Instacart and Walmart going after its customer base.
“There’s a fine line between leaning into your existing and historic advantages and strengths, versus getting into a new business mainly to serve your old legacy business.”
An example Del Rey shares is the experience inside of Whole Foods, where stores are often crowded with pickers who are picking orders for customers who’ve placed online orders.
“I think it’s gotten better in some places, and the delivery people are doing nothing wrong. They’re told to pick off the shelves. But who are you serving? The pickers who are working to fill an online order, or the customers who are walking into a store?”
Where one is weak, the other is strong
Walmart’s crowning glory is its network of Super Centers. 90% of Americans live within 10 miles of a Walmart store. These stores are profitable, and there are over 10,000 stores and clubs in 20 countries. As the book shares, it took many years for Walmart to embrace the ecommerce opportunity and provide the resources and leadership it needed to develop a compelling online offering. The reluctance to face the innovator’s dilemma has ultimately set Walmart back with its online business.
Amazon on the other hand is a world-class online retailer, that has had limited success with the physical stores it has opened, such as Amazon Fresh, the 4-Star store, bookstores, and convenience stores.
Over time, both companies have hired executives from the other in order to address these weaknesses. So I asked Del Rey why each company continues to battle these different demons.
“It’s really hard to expand out of your DNA which is digital at Amazon. But a bigger thing was they talk about only entering new spaces if they feel they have really strong differentiation. In some of these physical settings they did have differentiation but I think the market told them maybe not compelling enough differentiation.”
“All of that said, I don’t count Amazon out. There’s a lot of smart people there and still a lot of money in those coffers. Perhaps the battle has been more uphill than they thought in physical retail. But I think they’re going to make another big attempt to work it out.”
Walmart embraces reinvention
For the book, Del Rey got to speak with CEO Doug McMillon as well as other c-suite executives. “Walmart gave me access. When I say access I mean not a ton of time, but interviews with basically their entire C level.”
“I think they want to tell their story. They proud of some of their successes over the years in reinventing themselves. In discussing innovation and digital, I think they’ve tried to open up a little more than they have historically.”
Having covered Walmart across several eras of CEOs, Del Rey credits McMillon as setting this tone of humility.
“He is protective of their reputation and thinks they’re still misunderstood in a lot of ways I think more so than a lot of past CEOs at Walmart. He would acknowledge where they have a lot of work to do.”
And there’s a new dynamic emerging where a lot of Walmart plus customers are a more urban set who don’t regularly visit supercenters. “I think that’s a real sign of optimism for Walmart that they have tapped into this new audience that they wanted to for a long time”
The retail media battle has only just begun
One war that was starting to really kick into high gear as Del Rey researched and wrote the book was retail media. When he started reporting this book about three years ago, Amazon had a big advertising business by then already, but Walmart did not.
“With retail media it’s something I hear from brands a lot – the desire for meaningful competition. Amazon is truly leaps and bounds ahead of anyone. There are lots of other battles unfolding and it’s a matter of timing and timeline.”
“The inherent challenge of chronicling a rivalry that has gone on for decades but that has also not ended is that there are going to be new businesses and events and major happenings that are going to continue to happen. I just kind of have to live with that.”
Shared challenges with house brands
I noted that another event that unfolded after Del Rey finalized the manuscript was the sale of several digital native vertical brands that Walmart acquired under the leadership of Marc Lore. Moose Jaw, Mod Cloth, Eloquii, and Bonobos were sold off at pretty steep discounts compared to the price Walmart paid for them.
CHICAGO, IL – APRIL 20: Founder & CEO of Bonobos Andy Dunn. (Photo by Daniel Boczarski/Getty … [+]
Amazon also had a pretty thriving house brand business back in the day. I did some research of my own recently, looking at 35 of these house brands that were active back in 2019, including some that seemed to be doing quite well at the time. 60% of those brands have folded.
I asked Del Rey’s perspective on why these two incredibly successful retailers had such a hard time building in-house brands.
“Each company at different scales has had some successes with House Brands. But those are mainly not ones you’re buying because you feel love for the brand – but because it’s the cheapest option, or you get great value from it.”
“One thing is go back to each company’s DNA. Brand-building in a way that that is about more than just the lowest price, is not historically the type of thing they’ve been good at.”
“With the digital native brands, it could have made sense if there was really a big group of these brands and there was synergies that they could get from Walmart – Strengths they could get or savings they could get. But the acquisition strategy never really got out of the first or second inning, and a couple of the brands were not ones that you could ever see being sold in Walmart stores.”
The book shares a story about the women’s underwear brand Eloquii which was acquired by Walmart, only for Walmart leaders to later discover was in worse financial state than due diligence originally suggested.
“There are a lot of those instances where really talented digital focused folks coming into the company who have some great strengths but operationally are just not hitting numbers. And if you’re a skeptical top executive at Walmart to begin with, how are you going to trust or invest in these things going forward?”
Walmart Plus versus Amazon Prime
I shared my personal experience with my own Walmart.com orders arriving same-day from a Super Center near my home in Atlanta. This is in contrast to the Amazon Prime experience where Del Rey has previously reported that Prime delivery times have deteriorated in some geographies.
The same day delivery from Walmart is a delightful customer experience. “Now, how sustainable is it? I think it is possible, but I was born skeptical. I’d like to see it at scale. But they really nail that convenience piece,” Del Rey said.
I shared a new trend I’m seeing which is a lot of Walmart+ customers are more of the ‘urban set’ who don’t regularly visit supercenters. Del Rey agrees. “This is a real sign of optimism for Walmart that they have tapped into this new audience that they wanted to for a long time.”
At the same time, Del Rey says his interactions with Doug McMillon muted the expectations that Walmart+ is an essential part of its growth strategy.
“Walmart+ is like a thing we’re doing and investing it in in but it is not everything. He was really trying to like set relatively conservative low expectations at least with me. He really believes that the advertising business is going to be a huge one, the health care business is going to be a huge one, and also the pick-up business.”
“So that’s why it only needs to be a small business, or perhaps he seeing some stuff in the early data that has him nervous. I can only tell you I think they’ve done a pretty good job with and one of the regrets of some folks who’ve worked there is that it should have come out a couple years earlier.”
Walmart as the ironic savior for brands wearied by Amazon’s dominance
The opening scenes of Walmart’s first foray into ecommerce – where the project was quickly de-prioritized and the employee headhunted by Amazon – establishes the tone for the decades-long war that the retailers engaged in. Walmart continually ignoring Amazon as an existential threat, while Amazon built considerable advantages with their customer experience and compelling features for brands to reach this prized segment.
Toward the end of Winner Sells All, Del Rey touches on a topic near to my heart: the irony of Walmart as the savior of brands who feel that Amazon has too much power in the ecommerce space.
“I don’t remember exactly when the pleadings started but I remember the shock with which I received them. From small Amazon sellers to big brands that were sick of the one-sidedness of doing business with Amazon to government insiders who feared Amazon’s growing power but didn’t trust that regulators or lawmakers either had the will or legal grounds to curb it. When will Walmart step up its game and provide a viable alternative to the Jeff Bezos empire? Walmart the main street killer. Walmart the union-busting bully. Walmart the e-commerce laughing stock – now being asked to be Walmart the savior.”
Winner Sells All is available through booksellers today.
Source: https://www.forbes.com/sites/kirimasters/2023/06/20/inside-amazon-and-walmarts-decades-long-battle-for-digital-dominance/