It was nearly three decades, and an epidemic. It took close to three decades and a major pandemic before Amazon became the largest international retailer other than China.
According to a report in today’s New York Times, Amazon sold more than $610 billion worth of goods over the 12 months ending in June, compared with Walmart’s sales of $566 billion for the past 12 months.
Amazon’s rise is the result of Jeff Bezos, the founder of Amazon. He had a long-term vision that combined the ease of online shopping with the ability to have it delivered at home would win the day.
Let’s briefly examine how the pandemic increased trends already in motion and what business owners can take away from Amazon’s success.
Customers want to be able to show them what they need beforethey want it.
Bezos believes that ecommerce is the future. This is one of the reasons Amazon Prime was so heavily invested in. It offered fast delivery on a wide range of products and only took one or two days to deliver them.
Wal-Mart has been investing huge amounts in its ecommerce offering over the past few years to try to be competitive with Amazon while maintaining its grip on physical retail. Walmart’s hybrid model offered distinct benefits, such as the ability to view their merchandise in person prior to purchase or to try clothes on to ensure they fit.
The pandemic struck.
Many customers are willing to shop online, then go to a store such as Walmart to pick up their items. However, Amazon is becoming more popular because it offers more products and can deliver directly to their doorstep.
Amazon also doubled its efforts to meet demand by adding new warehouses in hundreds of cities and a workforce of hundreds of thousands.
Amazon was, in other words, all-in on its vision and the results were impressive.
Do not hate your opponent. Modify the game.
Walmart rose to prominence by perfecting the big-box retail model. Walmart built a vast logistics network and managed it as if it were a Formula One pit crew. This saved the company money that was passed onto customers.
Amazon aimed to be a different company than Walmart and make online shopping as easy as possible so people will prefer to shop in person.
Amazon is not only focused on ecommerce but also differs significantly from Walmart in another important way.
Nearly all sales at Walmart are made from the company’s own inventory. Amazon has an extensive inventory. However, its real success depends on the third-party sellers that simply use Amazon to sell their products. According to the New York Times, almost two million sellers sell products through Amazon. They account for nearly half of all sales.
What is the result?
Amazon has lower overhead and generates more revenue, but it still makes more profits.
Amazon is now the clear winner thanks to this change in game.
What does the future look like?
It is likely that consumer behaviour will change as the current pandemic passes.
What about the next global pandemic? How about the advancement of technology in virtual and augmented realities? These advances will likely cause Amazon to be more competitive than Walmart.
The future will show.
One thing is certain…
There is no turning back.
Publiated at Wed 18 August 2021, 11:36.26 +0000