Question

Analyze the titled “Who’s the World’s Top Retailer? Walmart and Amazon Duke It Out” on pp. 116-118 of your textbook.
Please kindly do:
1. analyze the case study comparing Walmart and Amazon’s business models and business strategies,
2. explain the role that information technology plays in each of these businesses and describe the role of the various IT professionals involved in this case,
3. explain how IT helps influence Walmart and Amazon’s organizational strategies, and
4. summarize your findings in a two- to three-page paper.

Answer 1

Walmart was founded as a traditional, off-line, physical store in 1962, and that’s still what it does best. But it is being forced to compete in e-commerce, whether it likes it or not. Six or seven years ago, only one-fourth of all Walmart customers shopped at Amazon.com, according to data from researcher Kantar Retail. Today, however, half of Walmart customers say they’ve shopped at both retailers. Online competition from Amazon has become too tough to ignore.

Why is this happening to Walmart? There are two trends that threaten its dominance. First, Walmart’s traditional customers—who are primarily bargain hunters making less than $50,000 per year—are becoming more comfortable using technology. More affluent customers who started shopping at Walmart during the recession are returning to Amazon as their finances improve. Amazon has started stocking merchandise categories that Walmart traditionally sold, such as vacuum bags, diapers,and apparel, and its revenue is growing much faster than Walmart’s. In 2013, Amazon had sales of nearly $67 billion, compared to online sales of about $9 billion for Walmart.

If more people want to do even some of their shopping online, Amazon has some clear cut advantages. Amazon has created a recognizable and highly successful brand in online retailing. The company has developed extensive warehousing facilities and an extremely efficient distribution network specifically designed for Web shopping. Its premium shipping service, Amazon Prime, provides fast “free” two-day shipping at an affordable fixed annual subscription price ($99 per year), often considered to be a weak point for online retailers. According to the Wall Street Journal, Amazon’s shipping costs are lower than Walmart’s, ranging from $3 to $4 per package, while Walmart’s online shipping can run $5–$7 per parcel. Walmart’s massive supply chain needs to support more than 4,000 physical stores worldwide, which Amazon doesn’t have to worry about. Shipping costs can make a big difference for a store like Walmart where popular purchases tend to be low-cost items like $10 packs of underwear. It makes no sense for Walmart to create a duplicate supply chain for e-commerce.

However, Walmart is no pushover. It is an even larger and more recognizable brand than Amazon. Consumers associate Walmart with the lowest price, which Walmart has the flexibility to offer on any given item because of its size. The company can lose money selling a hot product at extremely low margins and expect to make money on the strength of the large quantities of other items it sells. Walmart also has a significant physical presence, with stores all across the United States, and its stores provide the instant gratification of shopping, buying an item, and taking it home immediately, as opposed to waiting when ordering from Amazon. Two-thirds of the U.S. population is within five miles of a Walmart store, according to company management.

Walmart has steadily increased its investment in its online business, spending more than $300 million to acquire five tech firms, including Small Society, One Riot, Kosmix, and Grabble, while hiring more than 300 engineers and code writers. Other recent acquisitions include Torbit, OneOps, Tasty Labs, and Inkiru, that will help give Walmart more expertise in things like improving the product recommendations for Web visitors to Walmart.com, using smartphones as a marketing channel, and personalizing the shopping experience. Walmart has been steadily adding new applications to its mobile and online shopping channels, and is expanding its integration with social networks such as Pinterest

The company’s technology team is working on an application called Endless Aisle, which would allow shoppers to immediately order from Walmart.com using their smartphones if an item is out of stock. A Pay With Cash program enables the 25 percent of Walmart customers who don’t have credit cards or bank accounts to order their products online and then pay for them in cash at their nearest Walmart store. Walmart’s online and digital development division @WalmartLabs acquired the recipe technology startup Yumprint in order to expand its online grocery delivery services. Management hopes that Yumprint will help Walmart customers more easily make shopping lists from recipes they find in Yumprint before they shop. The company also hired former eBay executive Jamie Iannone to manage the integration of Sam’s Club’s Website with Walmart’s global e-commerce unit.

Walmart’s Sam’s Club has been testing a new subscription service called My Subscriptions that allows its 47 million members to order over 700 items, including baby, beauty, and office supplies in order to compete with Amazon’s Subscribe & Save program. Online customers will not need to pay shipping fees for these subscription items. Sam’s Club used to be unaffected by competitors like Amazon among shoppers of fresh food, groceries, and basic products that were either not sold on Amazon, or were more expensive online. Now 35-40 million households enrolled in Amazon Prime, and many Sam’s Club members tend to belong to Amazon Prime as well. Sam’s Club is starting to feel the pressure. Amazon is looking into starting a new business called “Pantry,” which would allow customers to purchase goods like toilet paper and cleaning supplies in bigger bundles for cheaper shipping costs.

Walmart is also trying to improve links between its store inventory, Web site, and mobile phone apps so that more customers can order online and pick up their purchases at stores. Shoppers can order items online and pick them up from lockers in local stores without waiting in line. (Walmart already offers in-store pick up of online orders.) Walmart’s lockers are similar to Amazon’s recent deal with Staples and 7-Eleven to do the same.The idea is to be able to offer Walmart products anywhere a consumer prefers to shop, whether that’s online, in stores, or on the phone.

The company is re-thinking its in-store experience to draw more people into its stores. More than half of Walmart customers own smartphones. Walmart has designed its mobile app to maximize Walmart’s advantage over Amazon: its physical locations. About 140 million people visit a Walmart store each week. The company started testing the app’s in-store mode, which detects when a customer is in a physical store. When the mode is activated, customers can check their wish lists, locate items of interest in the store, and see local promotions. The app’s “Scan & Go” feature lets customers scan items as they shop so they can move quickly through self-checkout. Shoppers can add items to their lists using voice or by scanning bar codes.