Derek Streidl Case Study 1: Produce Wars: Walmart vs. Amazon ECO-505: Intro to Graduate Economics February 4, 2023 1. Evolution of Business Models a. Amazon and Walmart both share the leading space in global retailers, innovating through unique uses of data-driven decision-making and utilization of everchanging consumer inputs. Amazon is the premier dominating retailer in the online world while Walmart enjoys the same title for brick-and-mortar retailers. Both giants play an essential role in the buying decisions of consumers, being driven primarily by price mechanisms and steadily more convenient means of distribution (O’Connor, 2013). Walmart has been desperately trying to catch up with Amazon in the digital space as Amazon continues to break new ground. Both retailers have continued to expand their consumer base by focusing on lower prices and a larger network of delivery options. b. Both retailers will continue to do their best at capturing the largest percentage of consumers they can by continuing to adapt to the evolving market of speed and repetition. Amazon has established itself already as the leader in e-commerce, an internet-based mass retail brand, so Walmart will try its best to keep up, even copying some of Amazon’s successful ventures; Walmart Plus accounts promised consumers similar benefits to Amazon Prime but without the follow-through and execution Amazon was able to secure. Where Walmart shines though, is the grocery market and the fact that Amazon has yet to be able to overcome the hurdle of delivering perishables such as fruits, vegetables, and meats to consumers on a mass scale. Walmart can continue to dominate this space due to its physical store presence, something Amazon does not have. Amazon did do its best to circumvent this by acquiring Whole Foods in 2016 and expanding into physical grocery stores, though the high price points still keep this part of Amazon’s market reserved for those in higher tax brackets. Both retailers have attempted to meet consumer demand for same-day delivery through these means, but the online space could soon become the new grocery store. 2. Comparative Advantage a. Amazon’s comparative advantage is its extremely centric focus on consumer opinions and needs. Sellers on Amazon (such as myself) know that the reviews on a product combined with the speed of delivery to a consumer are the two most important pieces to being successful. Amazon has created a more customer-focused experience where consumers can have their voices and opinions not only heard but can see the company actively implementing the suggestions into action. Walmart on the other hand, has the advantage of physical locations, meaning that even “same-day Prime delivery” can be trumped by a quick drive to the store, eliminating even just a few hours of waiting for the consumer, savings on shipping or membership costs (Prime is a monthly charge vs Walmart being free to shop at same-day) and the ability to return unwanted items the same day, without the need to wait for Amazon to process the return and refund them. b. Based on these comparative advantages, it would look like Walmart is the most likely to dominate the growing online market for perishables mostly due to the existence of its physical stores. Additionally, the retailer has also implemented a free curbside pickup service (over $35 purchase), a reward point system through Walmart Plus, and even the acceptance of discount medical programs such as Good RX. In this case, unless Amazon either begins utilizing physical locations for a perishables market or can solve the hurdle another way, Walmart looks poised to continue its domination of these items. 3. Business Strategies a. Miss Zybowski focuses on Walmart’s inability to shift consumer mentality when it comes to their brand and their brand's identity, mainly in the thought that Walmart is a leader in low prices both physically and digitally, but she also goes on to discuss the importance of Walmart needing to grow its range of available products online. Just because most of a consumer’s bill is groceries during a Walmart shopping trip, non-reusables like household cleaning products, toiletries, and food storage also make up an admirable portion of the receipt. An article published in GeekWire thinks the very opposite of Miss Zybowski though, saying Amazon’s technological superiority & acquisition of Whole Foods will help “Amazon will pass Kroger to become the number two grocer in the U.S. by 2025, and surpass Walmart to claim the number one spot sometime between 2027 and 2030, [and] can offer grocery customers a greater value proposition than stand-alone grocery retailers like Albertsons and Kroger and even Walmart; Amazon will leverage their physical stores to gain trust with consumers that Amazon can offer the freshest of fresh fruits, vegetables, meat, milk, eggs, dairy, and baked goods” (Levy, 2017). b. If Walmart were to hire me as a consultant, my suggestions would be focused on the retailers' need to expand in its digital sales and e-commerce space. The company has a well-grounded, brick-and-mortar presence, one that Amazon does not have and frankly, one that would be far too costly for Amazon to attempt to rival at this point. “Wal-Mart’s retail footprint enables high sell-through of perishable products and high velocity of distribution, preserving product freshness” (N, 2017). Consumers who live near Walmart will continue to shop there for “same-day” access to needed groceries and perishables, allowing Walmart to continue to service this large group of customers over Amazon. I would also look at trying to replicate responses from consumers in the way Walmart did with the COVID-19 pandemic when it allowed customers to create their entire shopping lists online, pay for them and have them loaded into consumer vehicles at curbside pickup without any additional fees or costs, which of course spurred a lot of people to use Walmart for shopping during COVID who otherwise, may have continued getting perishables from competitors. This creates a positive experience that may even lead to increased online ordering in the future. References: Levy, N. (2017, July 12). Amazon will become top U.S. grocer by 2030, and Walmart should buy Costco to compete, former Insider says. GeekWire. Retrieved February 10, 2023, from https://www.geekwire.com/2017/amazonbecome-top-u-s-grocer-2030-former-amazonfresh-leader-says-walmart-costco-merger-competition/ N, D. (2017, January 31). 3 reasons why Wal-Mart will defeat Amazon by Winning Online Grocery. LinkedIn. Retrieved February 5, 2023, from https://www.linkedin.com/pulse/3-reasons-why-wal-mart-defeat-amazonwinning-online-grocery-ngin/ O'Connor, C. (2013, April 24). Wal-Mart vs. Amazon: World's biggest e-commerce battle could boil down to vegetables. Forbes. Retrieved February 10, 2023, from https://www.forbes.com/sites/clareoconnor/2013/04/23/wal-mart-vs-amazon-worlds-biggest-e-commercebattle-could-boil-down-to-vegetables/?sh=402e87d03154
