Monday, August 8, 2016

Walmart Buys To Catch Up To Amazon

Today, Walmart announced that they are indeed buying Amazon competitor  Likely to close by end of year, the rationale to purchase seems obvious, play catch up to Amazon. But to make it work, the strategy will require a visible way to make the physical stores and online presence a bigger, better, more enticing experience than what Amazon already offers.  Not an easy task.

According to the NY Times, "Under the deal, Walmart and Jet will continue to operate as distinct brands."  Walmart believes initially, they will have leverage to price their products lower and yet still profit.  But as Amazon demostrates, it is more than just lower prices.  Convenience, delivery, a wide range of products and services from many vendors, plus the Prime business of cheaper delivery and streaming content truly helps the Amazon brand.

Walmart and, operating independently may not be an ideal fit.  Finding the synergistic elements as well as the marketing approach that clearly shows the benefits to the end user are essential.  That will take a lot of work.  Done well, it could make them a venerable competitor.  It could also draw in other brick and mortar retail operations to build out their own delivery operations as well.  We see it already with supermarket chains offering home delivery services.  And department stores seem willing to ship for free merchandise not already available in store for pickup to the home.  So for Walmart, must do something more to take away Amazon market share. 

Once the acquisition closes, it will be fascinating to see how good a fit the two brands can make.  But the real win will be if it adds value to the operation and delivers results that exists today.  Retail is a tough world, operating on thin margins.  Walmart and Jet must see that this merger is a good move for both.