In America, the holiday season soon begins, starting on Thanksgiving and lasting until Christmas. For this one month, stores receive 25% of annual revenue. Traditionally, most of the customers at this time take Amazon. But the largest offline retailer in the world, Walmart, decided it was time to stop it. He announced the launch of a program to temporarily reduce the cost of goods for online shoppers.
Several hundred thousand selected products from third-party sellers on Walmart.com will now sell below cost. The company compensates the difference to sellers from its own pocket, several billion have been allocated for this. So Walmart hopes to finally break Bezos' hegemony into at least some of the most important weeks of the year.
Many before that did not even know that Walmart has its own market place. In the meantime, there, like Amazon, goods from third companies that are delivered to Walmart's warehouses are exhibited. Moreover, you can pick them up both from the courier (delivery in America is free when ordering from $ 35) or at the nearest supermarket of the company, which is even more convenient for many. But Amazon, with its Prime program and wider assortment, remains the leader in online trading. About half of all online purchases in the USA are made on this one site.
For the past two years, Walmart has been vigorously competing with Amazon wherever it can. She teamed up with Microsoft, Google, began to rely more on robots and AI, broke Amazon’s bid on the Indian Flipcart, paying $ 15 billion for it. But to win the market from Bezos is not an easy task. Especially if he has a minimum margin, competition between sellers inside the site and prices are nowhere lower.
The new program, which experts estimate at $ 3- $ 5 billion, will allow merchants at Walmart.com to compete with offers from Amazon. And, as planned, will attract even more sellers and buyers to the site.
By the way, according to our observations, Walmart already has a lot of more advantageous offers, especially in terms of gadgets and children's toys. But the difference is small, $ 1- $ 5. Now, the company hopes that prices will become significantly lower, and this will allow to lure even the most inveterate Prime subscribers. In this case, merchants will receive the same money for each product as before. But the number of purchases should increase, so that their profit will become greater.
Such a radical proposal should be a response to the program that Amazon “rolled out” this summer. According to her, the online giant gets full control over setting prices for goods, even if third parties sell them on its site. This program was then criticized, sellers even wanted to sue Amazon for violating antitrust laws. Bezos was not afraid, moreover: now suppliers and sellers must carefully monitor that their products are not offered at lower prices on any other website. If Amazon detects that somewhere there is a lower price, they run the risk of being blocked, and even the money earned may not be paid to them.
This behavior prompted the Federal Trade Commission to launch an investigation into Amazon's business practices. They interviewed sellers to determine if the company was using its influence to stifle competition. Amazon controls about 47% of the US online market, which reached $ 590 billion per year (according to eMarketer). At the request of the Federal Commission, Amazon replies that it accounts for only 4% of the total (online + offline) retail market in the States, so there is no monopoly here.
Fight strategies
The new Walmart program is called Competitive Price Adjustment. It will be applied only to “selected merchants and selected goods”. They will be defined by the system in order to maximize the interest of customers, and so that they do not overlap with each other. Sellers cannot ask to be accepted into the program.
Customers will receive a short window of big discounts. Many may opt out of Walmart.com after prices return to their normal levels. But it will become more comfortable for others when working with the site, and they will understand that there is an alternative to Amazon, at least for this. At the same time, manufacturers are preparing to receive complaints from buyers who took the goods at other sites at an "overestimated" price.
Amazon is not going to give up its position either. A couple of weeks ago, the online giant presented its "application" for the holiday season. Her project is called Sold by Amazon. Sellers give the company the ability to manage the prices of some of their products (in practice, this means that Amazon reduces these prices by half). And Amazon in return promises them some guaranteed minimum payout so that they still remain in a small profit. It is useful, for example, if some goods do not live up to expectations, and too many were produced. Amazon calls its system “a new, improved sales method without having to keep your hands on the helm.” Now the program has more than 9000 products, with the prices of which Walmart will definitely not be able to compete.
Is there any chance
Walmart and Amazon are now keeping pace. Both companies now provide free next day delivery, both have a seller promotion program. Walmart says it has 75 million unique products on its website. The company's profit is declining, it is investing everything in growth, and the margin on goods has become lower than ever in its history. Investors trust this “work for the future” strategy. The company's shares over the past year increased by 29%. They grow faster than Amazon.
But. Walmart is still primarily an offline retailer. And the company is not ready to build itself on the model of a large online platform. For example, she still does not collect or monetize information about her customers. Amazon uses it, for example, to better know which products are sold, and then copy them . The store actively sells ads in search results, earning $ 10- $ 15 billion a year on this. Walmart at this time is busy selling goods.
Amazon also has an ace in its sleeve. Prime A service that includes everything. Here you have mini Netflix, Twitch subscriptions, food discounts at Whole Foods, music streaming, the Kindle catalog, unlimited photo storage, and a ton of other bonuses. Walmart has none of this. She has nothing to lure buyers with anything other than cheap goods.
Therefore, many experts still believe that Walmart will lose this war. And this reflects the stock price of the company - only $ 340 billion, against $ 870 billion from Amazon. Despite the fact that the annual turnover and profits of Walmart more than doubled.
