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BUSINESS PROBLEM-SOLVING CASE Walmart Versus Amazon and the Future of Retail Walmart is the world's largest and most success- ful retailer, with more than $485 billion in 2016 For online shopping, Amazon has some clea advantages. Amazon has created a rec sales and nearly 11,700 stores worldwide, including and highly successful brand in online retailing. The more than 4,600 in the United States. Walmart has company has developed extensive warehousing facili 2.3 million employees and ranks number one on the ties and an extremely efficient distribution network Fortune 500 list of companies. Walmart had such specifically designed for web shopping. Its premium a large and powerful selling machine that it really shipping service, Amazon Prime, provides fast "free didn't have any serious two-day shipping at an affordable fixed annual sub now Today Walmart's greatest threat is Amazon.com, scription price ($99 per year), often considered to be a often called the "Walmart of the Web." Amazon sells weak point for online retailers. According to the Wall not only books but just about everything else people Street Journal, Amazon's shipping costs are lower than want to buy-DVDs, video and music streaming Walmart's, ranging from S3 to $4 per package, while downloads, software, video games, electronics Walmart's online shipping can run $S to $7 per parcel apparel, furniture, food, toys, and jewelry. The com- Shipping costs can make a big difference for a store like pany also produces consumer the Amazon Kindle e-book reader and Tap speakers, and Fire TV streaming media player. No other online retailer can match Amazon's breadth of selection, low prices, and fast, reliable shipping. For many years, Amazon has been the Walmart where popular purchases tend to be low-cos items like S10 packs of underwear. It makes no sense for Walmart to create a duplicate supply chain for e-commerce. Fire tablet, Echo However, Walmart is no pushover. It is an even larger and more recognizable retail brand than Amazon. largest e-commerce retailer with the world's Consumers associate Walmart with the lowest prices largest and most powerful online selling machine Moreover, Amazon has changed the habits and expectations of consumers in ways to which Walmart 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 quantities of other items it sells. Walmart also has a er retailers must adapt. According to Brian on the strength of the large Yarbrough, a retail analyst at Edward Jones i Louis, Amazon and online retailing is probably the biggest disrupter of retail since Walmart itself. the instant gratification of shopping, buying an it significant physical presence, and its stores provide and taking it home immediately as opposed to Walmart was founded as a traditional, offline, physi- cal store in 1962, and that's still what it does best. But when ordering from Amazon. Seventy percent of the it is being forced to compete in e-commerce as well. U.S. population is within five miles of a Walmart store ght years ago, only one-fourth of all Walmart cus according to company management. mers shopped at Amazon.com, according to data Walmart has steadily increased its investment rcher Kantar Retail. Today, however, half ts online business, spending between S1.2 billion of Walmart customers say they've shopped at both retailers. Online competition and the profits to be reaped from e-commerce have become too important S1.5 billion annually in 2015 and the next few years on e-commerce. This includes fulfillment centers and technology and purchases such as $3 billion for Jet.com to secure expertise for delivering the lowest-cost basket of goods online. Walmart.com is now the second- most visited e-commerce site in the United States with Imart's traditional customers-who are pri marily bargain hunters making less than $50,000 per year-are becoming more comfortable using technology. More affluent customers who started million unique visitors per month. Walmart ha structed one of the world's largest private ng at Walmart during the recession are return- ing 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 computing centers, which provides the computing horsepower for Walmart to increase the number items available for sale on Walmart.com from I million three years ago to more than 50 million today. In the spring of 2015 the company opened four new fulfill- faster than Walmart's. In 2016, Amazon had sales of ment centers around the country, each of which is more nearly $136 billion. than 1 million square feet. To further counter Amazon.

Answer 1

Walmart is one of the biggest retailers and Amazon.com is its biggest competitor. Amazon.com is known as “Walmart of the Web”. They both offer everything at very cheap prices. 3-13 The competitive strategies of Walmart are listed below: The basic strategy adopted by Walmart is "Low-cost leadership". Using this strategy Walmart makes the customer visit the store again and again. Secondly, Walmart is targeting all the financial segments (lower-middle class, upper-middle class, upper class, etc.) of the market with low-cost leadership. While shopping at Walmart customers can take the products to their home immediately after purchase. Whereas, while shopping from Amazon, customers have to wait to get the product after the payment. • Walmart has a significant physical presence. This is because for 70% of the US population Walmart is almost 5 miles from their houses or offices. The Walmart online shopping website uses software to keep a track of competitor's selling price in real-time and in response it lower down the prices of same or similar products if required. The competitive strategies of Amazon.com are listed below:

Low-cost shipping charges. Amazon charge $99 a year for delivery within 2 days across the US. Whereas, Walmart charges $3-$4 per package for offline purchase and for online the shipping charges may vary from $5-$7. Amazon came up with physical stores enabled with an artificial intelligence system, due to which the customer does not have to wait at the billing counters. The AI keeps a track of the customer's cart and deducts the corresponding amount from the credit card linked to the digital cart of the customer. The optimized supply chain for e-commerce is something that Walmart can't match. Also, Amazon is expanding its policy of same-day delivery service. The framework of the value chain model is provided below: Firm Infrastructure Human Resources Technology Development Procurement Margin Inbound Operations Logistics Outbound Marketing Logistics & Sales Services The value chain model of Walmart is provided below:

Firm Infrastructure Successful activities integration to the value chain Bringing store-level concepts back to the top Human Resources Individual employee focus, empowering individuals as associates Benefits like paid offs, medical insurance, etc. are provided Technology Development Highly developed IT system Real time access to sales information Procurement Real time connection with suppliers and store inventories Direct contact with suppliers nation Margin (Profits) Inbound Logistics Operations Outbound Logistics Marketing & Sales Services Always low prices Real time data of inbound and Model can be in-progress replicated easily inventory Highly Only real time automated inventory and sales distribution tracking system facility Trucks never return empty Services are highly customer focused Products are assorted as per community and store layout The value chain model of Amazon.com is provided below:

Firm Infrastructure Value creation: Huge customer data is available to the business Cost reduction: Single technology platform with incremental service distribution Human Resources Hiring highly talented people providing benefits like incentives, medical insurance to family, restricted stock units, etc. Technology Development AI based shopping at the physical stores saves time Advanced customer database and analytics for recommendation and personalities Procurement Vast number of vertically integrated suppliers Various local vendors Inbound Outbound Marketing & Operations Services Logistics Logistics Sales Suppliers are World's most AI-Software Education and vertically Order fulfilment customer centric development training integrated company Warranty and High quality Content creation Order and Order handling support for control, for prime for online customer and packaging marketplace, locations shopping tracking AWS, Amazon Large warehouses Hassle free devices, other to facilitate AWS operations Generate invoice returns inventory services and products Margin (Profits) 3-14

Walmart's business model and business Amazon's business model and strategies strategies It is the world's largest retail store with It has been the largest online store with nearly 11,700 stores worldwide with more certain physical stores in Seattle, Chicago, than 4,600 stores only in the US. San Diego, and other US locations. It enables the low-cost leadership strategy It uses low-cost leadership to attract new and maintains its efficient customers. It customers and strengthen customer and uses a product differentiation strategy to supplier intimacy strategy to build strong separate the logistics supply chain. relationships with existing customers. Its online shipping cost ranges from $5-$7 Its shipping charges are $3-$4 each for each package. package or $99 for free delivery a year irrespective of the number of packages. The customer can use their products Here, the customer is required to wait for immediately after purchase. a minimum of one day to a maximum of one week to utilize the product. 3-15 The role played by information technology in Walmart's Business is provided below:

With the help of information technology, Walmart builds a smartphone app that will enable Walmart to reach more customers, i.e., the customer base of Walmart is increased by IT. It allowed a customer to place orders online in the case when a product is not available in the retail store. Refinement done with information technology in Walmart's Business are stated below: With the help of information technology Walmart developed software that track the information of their competitors and reduce prices of product as per requirement. With the help of IT customers purchase and make payment online that enable them to avoid long queues and save their time. The role played by information technology in Amazon’s Business is provided below: IT plays a major role in Amazon's business as the business is done through the website and smartphone app. The purchase and payment are done through the website and smartphone apps only. • It enables Amazon to provide customer support 24/7. Amazon open physical stores named Amazon Go, which is designed around an app. This app is able to place the items customer purchase in the digital cart so they can leave the store without waiting for checkout lines. This system automatically charges the card linked to the customer's Amazon account.

Refinement done with information technology in Amazon's Business are stated below: • IT helps to increase the orders in the town areas with the option of one-day delivery. Amazon has an optimized supply chain for online purchases and transactions, which Walmart does not match. 3-16 From the above discussions and the case study, it can be concluded that Amazon.com will dominate the retailing. Supporting reasons are stated below: • Amazon uses strong analytics for making recommendations to customers. • It provides a hassle-free change or exchange facility at the doorstep.

Easy money refund process against refunds that provide an extra edge to Amazon over Walmart. At Amazon customers can compare a range of similar products in real-time, providing value for money to the customers.