Based in Seattle, Washington, Amazon was an e-commerce and cloud computing company, started under the name ‘Cadabra’ by Jeff Bezos (Bezos) in 1994. The name was later changed and the company went online as Amazon.com. Amazon, which initially started as a book store, later diversified into several other categories like electronics, apparel, furniture, food, and many more. In 2000, Amazon launched Amazon Marketplace. That was when a new logo with a smile shaped from ‘a’ to ‘z’ was launched, indicating the company’s desire to sell anything from A to Z. Amazon started its “Prime” service in 2005, allowing free two-day shipping to those customers who paid a specific annual fee. It went on to add several dimensions to the “Prime” service by including Amazon original content and also online streaming of several popular TV shows, movies, and music. Amazon ventured into the ‘Food Delivery Business’ in 2006 by launching “Amazon Fresh” in Seattle. In 2013, Amazon unveiled ‘Drone Delivery’ plans for the first time under the name “Amazon Prime Air”.

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WAL-MART VS AMAZON – THE RETAIL BATTLE

Amazon was a young fledgling company in 1999 with annual revenue of US$1.6 billion, while Wal-Mart’s was around US$138 billion for the same year. According to observers, Wal-Mart had never dreamt that this small online company could grow to such an extent where it would challenge its very market position in the retail industry. In 2012, Wal-Mart’s revenue was about US$444 billion, estimated as 16 times the revenue of Amazon at that time and equal to 3% of the US economy – such was the strength and position of Wal-Mart in the US retail industry. But market analysts pointed out that gradually, due to increased internet usage and online retail growth Amazon had surpassed Wal-Mart’s traditional retail growth ..

WAL-MART’S INNOVATIVE PRICING STRATEGIES TO COMBAT AMAZON

Wal-Mart’s Pickup Discount initiative, also known as the ‘buy online and pickup in store’ (BOPIS) model, came in the wake of Wal-Mart’s US$3.3 billion acquisition in August 2016 of Jet.com, a 15-month-old online marketplace which sold almost everything – books, electronics, clothes, etc. Jet.com was founded by Lore, who was also the company’s CEO. A remarkable outcome of the acquisition was that Lore and his management team were given charge of the retail giant’s online channel, Walmart.com, which made them responsible for the entire domestic online operations of Wal-Mart..

WAL-MART’S STAND IN THE MARKET

As of January 2017, Wal-Mart operated in various formats of retail stores, under roughly 63 different banners including Wal-Mart, Sam’s Club, and Asda (UK), offering a wide variety of items in 28 countries across the world. As of January 31, 2017, Wal-Mart operated around 11,695 stores in total in 6,363 locations internationally. Apart from these physical retail stores, Wal-Mart also operated different ecommerce sites in 11 countries..

WAL-MART’S KEY ADVANTAGES OVER AMAZON

While Wal-Mart and Amazon were in a heads-on price war with each other, retail experts identified two strengths of Wal-Mart which gave it a key advantage over Amazon – ‘Physical stores’ and ‘Grocery Sales’. Based on a new report from Citi Research , Wal-Mart stood “Best Positioned” in terms of online grocery, compared to other online food marketplaces like Amazon Fresh/Prime Now, Kroger, and Whole Foods Market. According to a statement released by Food Marketing Institute and Nielsen in 2017.

HURDLES IN WAL-MART’S PATH

Analysts suggested that if Wal-Mart continued to cut prices in its price war against Amazon, then it would soon face the risk of losing out on profits in both online and in-store purchases, which would further affect the long-term sustainability of the company...

AMAZON’S RESPONSE TO WAL-MART’S PRICING STRATEGIES

As Wal-Mart started coming up with newer strategies to dominate online retail, Amazon too was not far behind in developing counter strategies to retain its position as top online retailer in the US. For example, to counter Wal-Mart’s free two-day shipping for orders above US$35, Amazon, which had increased its minimum threshold to US$50, brought it down to US$35, so as to not lose its customers to Wal-Mart...

WHO WILL WIN THE PRICE WAR?

Over the years, Wal-Mart had excelled and become the best in brick-and-mortar retail stores while Amazon had won the online retail spectrum (Refer to Exhibit V for most popular retail websites). Now, each was trying to venture into the other’s dominion by engaging themselves in price wars against each other. Considering this scenario, many experts deliberated over the other potential war-zones that these two companies might engage in, like, mobile, virtual reality, and augmented reality..

EXHIBITS

Exhibit I: Wal-Mart’s Net Sales Worldwide from 2006 to 2017 (In Billion US Dollars)
Exhibit II: Amazon’s Net Sales Worldwide from 2006 to 2016 (In Billion US Dollars)
Exhibit III: Retail e-commerce Sales in the US from 2015 to 2021 (In Billion US Dollars)
Exhibit IV: Online Grocery Shopping Sales in US from 2012 to 2021
Exhibit V: Most Popular Retail Websites in US, Ranked by Number of Visitors, as of March 2017