Two Titans of Retail Disruption Are Getting Ready to Rumble – What It Means To You
Amazon recently acquired Whole Foods, sending ripples through the stock market and retail universe. Some people think that Amazon is blazing a new trail of aggressive retail innovation and market dominance, but I don’t think so. I think that they are simply following Wal-Mart’s model. In response, Wal-Mart has joined forces with Google to fight back. But the lessons that saved small businesses from Wal-Mart in the 1980s and 1990s can protect small online businesses today.
A Brief History of Retail and eCommerce Disruption
Wal-Mart hasn’t always had groceries. In 1950, founder Sam Walton purchased an existing store in Bentonville, Arkansas – a small town in the Ozark mountains with less than 3000 people. He beat the competition by focusing on supplying a huge variety of goods, lower prices, and applying advanced distribution technology to keep them well-stocked.
It was much later that they added groceries to the mix by following Costco into the warehouse store segment with their Sam’s Club subsidiary in the early 1980’s. Then, in 1987, they opened their first “Hypermart” store – which was larger than their traditional Wal-Mart locations and added groceries to the mix. It was an instant, huge success.
So … startup; disrupt with technology, distribution, and low price points; expand into groceries. Doesn’t that story sound familiar? Amazon IS the Wal-Mart of this era and they have followed the exact same playbook. I wouldn’t be surprised if Jeff Bezos – CEO of Amazon – had a picture of Sam Walton on his office wall.
I think that it is VERY interesting that Sam Walton – the genius innovator and disruptor of retail – passed away in 1992 … two years before Amazon.com was founded. Given his track record, we can only speculate if he would have seen the future when it arrived and dominated the market once again when it moved online. But what we know is that Wal-Mart did not see the sea-change in commerce and their multi-billion-dollar empire is now at risk of becoming the Blackberry smartphone of retail – a former market leader that becomes out of fashion, in decline, and cranky about it.
Which bring us to the news of the day.
Brilliant eCommerce Business Partnership or Unholy Retail Alliance?
For such an historically innovative company, Wal-Mart woke up to the threat of eCommerce surprisingly late in the game – just a few years ago. Since then they have made what many view as a few half-hearted efforts – an acquisition here, an eCommerce website redesign there. But everything they did seemed like company leadership was patting the internet on the head and saying, “That’s nice dear, now go along and let the adults talk.”
So … what changed? Well, first there was the shocking reality of actually having to close stores. Wal-Mart has ALWAYS been about expanding into new territories. But in 2016 they announced that they were going to close some 269 locations. Then in 2017 the Wall Street Journal even put up a web page “Is Your Wal-Mart Closing?” because 154 more stores made the closing list.
Think about that for a moment. All during the decade of the 1990s the news was all about how Wal-Mart was going to put every other retail operation out of business. I remember the news … Wal-Mart is evil; Wal-Mart hates small business; Wal-Mart is this and Wal-Mart is that. Wal-Mart was going to be the end of retail and “everyone knew it.” Now they are closing locations.
Then, the other shoe dropped.
Amazon is the king of retail these days. Every slanderous thing said about Wal-Mart in the 1990s and 2000s is being said again about Amazon. The one saving grace for Wal-Mart has been that people still needed to buy groceries. And that fact brought all those target-market middle-income folks into their stores on a regular basis. Until now. Because Amazon’s acquisition of Whole Foods meant that – in Amazon’s view – there were no sacred cows. They intended to eat EVERYONE’s market, turning Way-Mart's trademark smilie face icon into something a bit less than happy.
This has sent Wal-Mart into an absolute frenzy, scurrying into the arms of Big Daddy Google. On August 23rd, Wal-Mart and Google announced that they were “joining forces” to take on Amazon in the world of online shopping.
In a way, this is a good move for Wal-Mart. They shed their arrogant indifference and said, in effect, “holy crap!” Because they have realized – perhaps too late, but maybe just in time – that they do not have technical expertise and obviously lost the start-up mentality. So they NEED the super-mack-daddy-savior of tech support to help them out … Google.
Google – on the other hand – is one of the big four tech giants who worries every-single-day that Amazon is going to use the proceeds of their retail empire to dominate the cloud. But Google knows less-than-nothing about selling actual stuff. Everything that they sell successfully is in binary code (no, don’t try to tell me about their Pixel phone until it actually makes a difference). Wal-Mart sells nothing but “stuff.”
The Google – Wal-Mart marriage might be a shotgun wedding of desperation, but that doesn’t mean that it ain’t gonna work.
Why Should You Care About Google, Amazon, or Wal-Mart?
When I was a kid, I was a HUGE fan of all those Tokusatsu SciFi movies – the Japanese monster films that featured Godzilla, Rodan, Gamera, Mothra, and a dozen other super-monsters. In most of those classic films, two humongous giants were awoken by some mysterious force or accident – plot was never the strong point. But in the end, everyone knew that the two mega-monsters were going to fight: one of the titans would prevail and the other would retreat or be vanquished. The only thing we all knew for sure was that Tokyo would get squashed during the battle.
Google / Wal-Mart and Amazon are setting up for an eCommerce battle royal and the point for the rest of the online retail universe is to NOT be Tokyo when they do.
It’s NOT a Fair Fight
Google and Amazon have ALL of the data. Seriously … if there is something about online consumer behavior worth knowing, these guys know it or their big-data engineers can squeeze it out of the web. In my opinion, Amazon has the edge in distribution. But Wal-Mart is no slouch. All three companies have billion-dollar budgets.
This pretty much guarantees that if smaller eCommerce sites try to compete against this pair of juggernauts on price, variety, and distribution you are going to get creamed. And if your plan is to sit and complain about it or wait for your congressperson to pass some kind of law or regulation … well, you are probably wasting your breath. But that doesn't mean that there isn't a path to success.
Surviving the Amazon / Wal-Mart / Google Cage Match
Twenty years ago when Wal-Mart was alone in trying to dominate the world of retail, every analyst predicted the end of small mom-and-pop stores. And yes, thousands of small shops went out of business when a Wal-Mart came to town. But some small businesses thrived. The same will be true this time now that the battle will be online. Here’s how:
1) Uniqueness – Think of fewer mass-market retail items and focus on specialty and niche products. There will be thousands of smaller product manufacturers who simply cannot produce enough volume to satisfy the big guys. Those smaller manufacturers will need you as an outlet as much as you need them for unique products.
2) Content, Content, Content – The giants can buy more ads than you, but even with all their vast riches there is simply no way that they can write up all those perfect product descriptions, post blog articles, shoot simple videos, take product action shots, and send promo emails when a new product becomes available.
3) Channels and Partnerships – In addition to your own eCommerce site, you can have a store on Amazon. If you are a distributor or manufacturer, you can even sell wholesale products directly to Amazon. And you will likely be able to do the same thing on whatever platform Wal-Mart comes up with. And eBay, and Zillow, and …. The point is that the big guys can’t set up channels in each other’s marketplaces. You can. You don’t have to pick the winner, you can play the field and have as many side channels as you can manage. And if you need more info about channels, remember we just did a big article on that exact topic.
4) Customer Service – Google is famous for NOT delivering service of any kind. Amazon does an OK job, but their service is 99% automated. Wal-Mart … well, the jury is out. If you care about your customers and deliver the best service possible, you are already winning.
5) Expertise – People like to buy from experts. Has anyone EVER purchased something on Amazon thinking that Amazon was making a good recommendation to them based upon the quality of the product? Has anyone ever made a purchase at Wal-Mart because the lady scanning the barcode was a recognized expert an anything at all? If you like what you sell, your site should be filled with evidence of that. People respond and want to buy from people who know what they are talking about.
6) Social Media – I dare you to check out the social media feeds of Wal-Mart and Amazon. Don’t worry about the number of followers. Look at the feeds. They are unfocused jumbles of disconnected themes pitching unrelated products. If you curate images and posts dedicated to your niche and interact with your audience you CAN beat the big guys at social media. That’s because social media is social, and mega-market-billion-dollar-corporations are usually really bad at being social about anything.
7) People Actually Like Buying Small – Most folks would prefer to buy from smaller businesses staffed with friendly people. Don’t hide from the fact that you are smaller than the Amazons and Wal-Mart Googles of the eCommerce world. Embrace it.
You Don’t Have To Beat Them To Win
Amazon is experimenting with nationwide drone delivery. But you don’t have to beat them in delivery speed. Amazon and Wal-Mart have unprecedented market purchasing power – they WILL get the best wholesale price on products. But you don’t have to beat them on price. You just have to be competitive.
Yes, there are those customers who only click on the lowest price. And people expect fast delivery these days. But if you are doing the seven things listed above, you can carve out a solid and profitable niche for yourself if you can provide great value in price and delivery – even if it takes one extra day or costs a dollar more. You can get your share of the market by doing the work.
There’s no stopping it. The Google Wal-Mart alliance is going to come up against the Amazon powerhouse. It’s going to be quite a fight. But you don’t have to be sitting around watching from the sidelines when it all comes down.
Thanks for reading!