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Can Walmart Catch Amazon In E-commerce? - YouTube
Channel: CNBC
[1]
When Amazon started selling more
than just books in the
[3]
late 1990s, it suddenly entered
into a rivalry with
[6]
the biggest name in retail.
[8]
Always low prices,
always Walmart.
[12]
Walmart has been at the
helm of American shopping for
[14]
58 years.
[16]
It employs more people than
any other company in the
[18]
world. And 90 percent of
Americans live within 10
[21]
miles of one of Walmart's
more than 4,700 U.S.
[24]
stores. The staggering size of
Walmart kind of escapes
[26]
people. It's the largest corporation
in the world in
[29]
terms of revenue. Yet when
it comes to e-commerce,
[32]
Amazon is the clear leader,
with 38.7 percent of the
[35]
market share compared to
Walmart's 5.3 percent.
[38]
And with the global
pandemic shifting shopper's
[40]
behavior for good, dominance in
online shopping is now
[43]
paramount. So if you're that
second site, you got to
[47]
be really good. You don't have
to be as good as
[49]
Amazon, because no one
will get there.
[51]
That's utopia. In perhaps
its clearest competitive
[55]
move against Amazon to date,
Walmart is now launching
[57]
Walmart Plus. The membership program
is meant to rival
[60]
Amazon Prime, offering benefits
that can't be
[63]
replicated online.
[64]
These guys are toe-to-toe and
nobody wants to stop
[67]
swinging. Nobody wants
to back down.
[69]
You know, the consumer
is ultimately the beneficiary,
[71]
clearly. Here's a look at
how Walmart Plus compares to
[75]
Amazon Prime and all the
other ways Walmart is trying
[77]
to catch up as the
pandemic makes online shopping an
[80]
increasingly crucial part
of doing business.
[86]
Walmart has been working behind
the scenes since at
[89]
least 2018 to create a
competitor to Amazon Prime.
[91]
From our data study, we found
that two thirds of people
[94]
that had already joined
our premium loyalty program
[97]
would join another one.
[99]
Although the landing page says
Walmart Plus is coming
[101]
soon, the pandemic delayed its
planned release in the
[103]
spring. Walmart stock surged
seven percent when it
[107]
looked like it would launch
in July, but that didn't
[108]
happen either. When Walmart
Plus is available, members
[111]
will likely pay $98
for benefits like unlimited
[114]
same-day delivery on groceries from
the 1,600 of its
[117]
4,700 plus stores that do
grocery delivery n ow.
[121]
When we did our data study,
81 percent of the consumers
[126]
joined Amazon Prime because
of faster free shipping.
[128]
Only two percent joined
because of grocery delivery.
[131]
So I think it's a
real opportunity to leverage what
[134]
they already have in groceries
and maybe what Prime
[136]
doesn't. And just this
week, Walmart announced a
[138]
partnership with Instacart,
testing out same-day
[140]
grocery delivery in four
markets across California and
[143]
Oklahoma. Other perks are
rumored to include early
[146]
access to sale events,
discounts at gas stations
[149]
outside of Walmarts and
Walmart-owned Sam's Club
[151]
stores and reserved parking
spots in store lots.
[154]
As you think about Prime, 150
million, why would you go
[157]
head to head with that? If
you take a unique approach,
[160]
which it sounds like Walmart
is doing, you might be
[163]
able to get a
lot of those customers.
[165]
Amazon launched Prime for $79 a
year in 2005, at a time
[169]
when Walmart's profits were
greater than all of
[171]
Amazon's revenue. If you look
back at 2005 Prime had
[175]
one benefit, fast and
free shipping, two-day shipping,
[178]
which was like unheard of.
[180]
Fifteen years later, some 150
million Prime members pay
[183]
$119 a year for one-day
shipping on more than 10
[186]
million items with no
minimum purchase amount,
[188]
same-day shipping on some
three million items,
[190]
two-hour grocery delivery in
2,000 plus cities, deals
[194]
and sales events like Prime
Day and access to Amazon's
[196]
entertainment branch, Prime Video,
Amazon Music, Prime
[200]
Reading, Prime Gaming
and Amazon Photos.
[202]
It's a pretty compelling
value proposition, and that's
[204]
what anyone will have to deal
with, w hat if they want
[207]
to try to
compete with Prime?
[209]
Walmart doesn't have any
entertainment offerings of its
[211]
own, now that it
sold Vudu in April.
[214]
P rime members make up
about 65 percent of Amazon's
[217]
customers and the program has
a 95 percent renewal
[220]
rate after two years.
[221]
Walmart started chasing this type
of loyal customer in
[224]
May 2019 by offering free
next-day delivery on orders
[227]
over $35, less than a
month after Amazon announced its
[231]
default one-day shipping.
[232]
With Walmart Plus, all orders
will default to free
[235]
one-day shipping just
like Prime.
[237]
Despite the launch of Walmart
Plus and free fast
[240]
shipping, Walmart still lacks
one big thing that
[242]
Amazon has - sheer
volume of inventory.
[248]
Walmart.com has about 50,000
vendors selling items
[251]
online, while Amazon
has 8.7 million.
[254]
That's why in 2016,
Walmart bought discount online
[257]
retailer Jet.com for
3.3 billion dollars.
[260]
The acquisition brought relationships
with a slew of
[263]
brands that were already
comfortable selling on
[265]
Jet.com .
[266]
They are on track to
more than quadruple their online
[270]
business since they
acquired Jet.
[273]
It was an uh-oh moment
for every other brick-and-mortar
[275]
retailer, because now the
biggest brick-and-mortar guy
[278]
is now, you know,
moving heavily online.
[280]
E-commerce is a scale game and
you want to get as much
[283]
leverage as you can
on your fixed infrastructure.
[285]
And as you get bigger, cost
of goods goes down and you
[288]
get more leverage. Marc Lore
spent two years at Amazon
[291]
before breaking off to start
Jet.com , working to
[294]
undercut prices from
the e-commerce megastores.
[297]
Walmart's purchase of Jet.com was
the big move that
[299]
brought it into the big
leagues of online shopping.
[302]
When the deal was made in
2016, Lore signed a five
[305]
year contract to run
Walmart's e-commerce division.
[308]
I'm so excited to be at
Walmart, having a lot of fun.
[309]
We're going to keep talking to
you because I think that
[311]
you're the most inventive
man in retail today.
[313]
Walmart shut down Jet.com in
May, but it had already
[316]
brought an entirely new branch
of online sellers onto
[319]
its marketplace. Walmart CEO
Doug McMillon says he
[322]
would buy it
all over again.
[324]
If you look at the
trajectory of our business, it
[326]
changed when we made that
acquisition and we've been
[328]
able to attract brands to
Walmart.com - S'well, R
[331]
ay-Ban and Champion.
[337]
Historically, Walmart.com didn't
sell things from
[339]
third-party vendors, but since
the Jet.com acquisition
[342]
the number of products sold
on Walmart.com has grown
[345]
up to 10 times higher, and
the number of sellers on
[347]
its site doubled just
in the last year.
[350]
So they started
attracting more brands.
[352]
They retooled their website to
be more streamlined and
[355]
more intuitive,
more user-friendly.
[358]
And last year, Walmart
partnered with Advance Auto
[360]
Parts. Walmart was not going to
be a 100,000 SKU auto
[366]
parts retailer on its own.
[369]
They get that
with Advance Auto.
[371]
This is probably the
largest third-party relationship
[373]
that any online retailer
has with a brick-and-mortar
[376]
retailer. And in an effort to
reach a new type of
[378]
customer, Lore spearheaded the
purchase of several
[380]
specialty apparel companies like
Bonobos, ModCloth and
[383]
Eloquii, a lthough some have
been sold again since.
[387]
A big portion of
Walmart store customers are
[389]
lower-to-middle-income. I think what
they tried to do
[392]
here and through the Jet.com
brand was to continue to
[395]
go up market and go
for more profitable customers,
[400]
urban millennials. And then
they also introduced the
[402]
service Jetblack, which is
an upscale personal
[405]
shopping service. For a
large fee, Jetblack allowed
[408]
New York Walmart customers to
text orders to personal
[410]
shoppers for home delivery.
[412]
But Walmart shut it down in
February after it only saw
[415]
about 600 active members.
[417]
If we think about the
dynamics of the very, very
[420]
affluent and wealthy today, I
don't know if Walmart is
[424]
necessarily the company to be
housing a brand like
[427]
that. But in June, Walmart
pivoted again, announcing a
[431]
major partnership
with Shopify.
[433]
Often referred to as
the king of mom-and
[435]
pop-retailers, Shopify helps more
than 1.4 million
[438]
small businesses run
their online stores.
[441]
Now, these small businesses have
a channel to try
[443]
selling on Walmart.com.
[445]
For now, Walmart says it's
adding 1,200 of Shopify's
[448]
top merchants to its
site in 2020.
[450]
Walmart wants a curated
assortment on the website.
[453]
I mean, Amazon has
a very wide-ranging third-party
[457]
business, and with th
at comes some risk.
[459]
The partnership with Shopify
is really important, I
[462]
think it's very strategic.
[463]
And I do think it is
an attempt to pull away those
[467]
third-party sellers
on Amazon.
[469]
There has been kind of
a lot of tension between
[472]
third-party sellers
and Amazon.
[475]
On July 29th, Jeff Bezos
testified before Congress for
[478]
the first time in Amazon's
26 year history, partly in
[481]
response to questions about
reported use of
[484]
third-party seller data to
develop Amazon's own
[486]
competing products. The House
Judiciary Committee is
[489]
investigating whether Amazon,
along with Apple,
[491]
Facebook and Google, need to
be governed by stricter
[494]
antitrust laws.
[496]
Why should a third-party so
list their product on
[498]
Amazon if they're just going
to be undercut by
[500]
Amazon-own ed product as a
result of data you take
[503]
from them? I think what I
want you to understand, and
[506]
I think it's important to
understand, is that we have
[509]
a policy against using
individual seller data to
[514]
compete with our
private label product.
[516]
You couldn鈥檛 assure Ms. Jayapal
that that policy isn鈥檛
[519]
violated routinely.
[521]
While Amazon is battling to
keep the trust of its
[523]
third-party sellers, Walmart still has
a long way to
[525]
go if it wants to catch
up with the millions of
[528]
third-party sellers that make up
more than half of
[530]
Amazon's sales. The Walmart
marketplace is a lot
[534]
smaller, so you could be,
quote unquote, crushing it
[536]
on page one on Walmart
and you're still not getting
[538]
that many sales. Still, Walmart
has one big, long
[542]
standing advantage over Amazon,
its 11,500 global
[545]
stores. If you're a third-party
seller, like if you
[548]
can get into brick-and-mortar
Walmart, you're going to
[550]
crush whatever sales on
Amazon you're doing.
[553]
For sellers choosing where
to reach customers, stores
[555]
are a big bonus
and much more scalable.
[558]
So this diet pill company I
worked at, they had 30
[562]
different products that we
were selling on Amazon.
[563]
I launched a whole bunch
of them. We brought their
[565]
sales from one million
to three million.
[566]
And I thought that was like
the greatest thing in the
[568]
world. But that was nothing,
because I would see
[570]
purchase orders come across my
desk for the Walmart
[573]
brick and mortar side, for
the Walmart stores, there
[576]
would be like two million
dollars just for like one
[578]
region of the
United States.
[580]
Walmart stores also help keep
down its costs in the
[583]
most expensive area of
online retail - shipping.
[586]
If you can leverage those
stores as your fulfillment
[588]
centers, meaning if I'm
going to purchase something
[590]
and I'm in the Philadelphia
area, have it come from
[593]
the store that's three blocks
from my house as opposed
[595]
to Virginia , you know, price
points go down and speed
[599]
goes up. Amazon has been
spending wildly to try and
[602]
control the expensive shipping
process, but it's 175
[606]
fulfillment centers and own
network of planes, trucks
[608]
and contracted delivery drivers
don't come close to
[611]
the reach of Walmart's 4,700
stores that allow its
[614]
trucks and drivers to travel
a fraction of the
[616]
distance. Walmart had the
advantage of getting product
[620]
from distribution center to the
store, and then the
[622]
consumer handles the last mile
for a lot of it.
[626]
Walmart uses its stores
as distribution centers for
[628]
products, but also has its
own dedicated network of
[631]
warehouses without a
front-facing store.
[634]
Walmart remains dominant in
another sector that's
[636]
largely dependent on
brick-and-mortar stores -
[639]
groceries. We're not very
densely populated, and so
[644]
it's hard to service, in
an e-commerce model, grocery.
[648]
So what that means is that
Amazon is really at a
[651]
little bit of a
disadvantage relative to Walmart.
[654]
They have stores within 90
percent of the population
[658]
in the United States. Grocery
sales account for more
[661]
than half of Walmart's U.S.
[662]
revenue, making Walmart the
nation's biggest grocer.
[665]
Walmart's been selling groceries
directly to customers
[668]
since the 80's, and the
online sale of groceries is
[671]
now boosting Walmart's
overall online sales.
[673]
The percentage of all U.S.
[675]
grocery sales happening online is
set to double from
[678]
20 percent in 2019 to 35 to
40 percent this year a nd
[681]
next. You find your grocery
vendor and you tend to
[685]
stick with them. You also get
a treasure trove of data
[687]
from grocery customers
about their preferences.
[690]
A nd you can use that
dat a, and I believe Walmart
[692]
will use that data, to
sell them other things.
[695]
I think that Walmart is going
to win in this grocery
[698]
battle versus Amazon.
[701]
When Amazon bought Whole Foods
for 13.7 billion in
[704]
2017, it was a clear
move to compete with Walmart.
[707]
But with roughly 475 stores,
Whole Foods has about a
[711]
tenth of the locations as
Walmart does in the U.S.
[714]
You cannot find a
tougher brick-and-mortar segment to
[717]
get into than food.
[719]
You've got to manage a
million vendors, produce is
[721]
hard, meat is tough.
[724]
And they chose to
get into that business.
[726]
They're still learning. Then in
2019, a month after
[729]
Amazon announced free two-hour
grocery delivery for
[732]
Prime members in 2,000
regions, Walmart announced a
[735]
membership program offering
unlimited grocery
[737]
deliveries from
1,400 stores.
[739]
It costs $12.95 a month or
the same $98 annual fee of
[743]
the new Walmart
Plus membership.
[745]
Or for an extra seven
dollars a month, Walmart will
[748]
deliver groceries straight into
your fridge in a
[749]
handful of cities. Digital grocery
is the next big
[754]
battleground in e-commerce.
[756]
It's a one trillion dollar
retail category that is
[760]
today the least
penetrated category online.
[762]
So as it continues to grow
at outsize d rates, there
[766]
are tens of billions
of dollars at play.
[770]
In one survey before the
pandemic, about 39 percent of
[773]
U.S. consumers reported having
shopped online for
[775]
groceries at least once.
[777]
By May, that number
was nearly 80 percent.
[779]
But how many people are
going to go back to
[780]
conventional shopping or how many
people are going to
[782]
stay with buying their
staples online because they
[784]
can? While the pandemic boosted
the importance of fast
[788]
grocery delivery, Walmart has
an even faster, more
[791]
cost-effective option -
curbside pickup.
[794]
When you pull up, they put
it in the car and you're
[795]
gone. That's a big weapon.
[798]
While this is an option
at Whole Foods stores ,
[800]
customers need to wait
for regular Amazon.com
[802]
purchases to be delivered.
[805]
In July, Prosper Analytics found
that 62 percent of
[807]
adults are shopping
in stores less.
[810]
So as the pandemic pushes
so many online for their
[812]
shopping, Walmart's name
recognition with older
[814]
shoppers is also a plus.
[816]
My parents, as an example,
they're not the most robust
[819]
online shoppers, but when this
pandemic hit like they
[822]
had no choice. But they've
been to a Walmart before.
[825]
When forced to purchase things
online, you're going to
[828]
go with who you know
and who you trust.
[830]
Walmart hired 200,000 employees
during the pandemic to
[833]
help clean stores and
keep items in stock.
[835]
It's giving a third round
of bonuses to hourly
[837]
employees working during the pandemic
for a total of
[840]
1.1 billion dollars in bonuses
this year while facing
[843]
backlash for sick
and dying workers.
[846]
Now, for the first time in
30 years, Walmart will be
[848]
closed on Thanksgiving Day.
[850]
It's also cutting some corporate
roles as it merges
[852]
its online and
store businesses.
[854]
Amazon meanwhile, postponed its
annual Prime Day event
[857]
that usually sets sales
records in July.
[860]
It offered one-time bonuses
to front-line workers
[862]
totaling 500 million dollars and
gave workers a two
[865]
dollar-per-hour raise from
March to May.
[867]
It hired 175,000 workers to
keep up with demand during
[870]
the pandemic, but faced backlash
for keeping all its
[873]
warehouses operational despite
worker deaths.
[876]
Still in the second
quarter of 2012, Amazon's
[879]
first-party sales were up
48 percent year-over-year,
[882]
with third-party sales
up 52 percent.
[884]
Walmart's online sales rose 74
percent in the first
[888]
quarter of 2020. I mean,
you could argue during the
[890]
pandemic that Walmart's taken a
bit of a lead because
[894]
they haven't publicly had
the delivery delays, the
[898]
product to the consumer delays,
that Amazon has had.
[902]
When I began reporting on
the pandemic in March, I
[905]
discovered that Amazon was
actually trying to get
[907]
shoppers to buy less.
[908]
Fewer nonessential orders meant
they could focus on
[910]
shipping things like hand
sanitizer and masks to
[913]
hospitals and
state agencies.
[915]
That's when I decided to
give Walmart a try.
[918]
My last order on Amazon
was back in February, which
[920]
was before they had a
lot of those shipping delays
[922]
that were caused by supply chain
issues and such a big
[925]
surge in demand. When I stayed
home, I decided to get
[928]
my groceries from Walmart and
they usually came the
[930]
same day or the next day.
[932]
When I ordered other items
on Walmart.com, they always
[935]
arrived within the delivery window
and I never had any
[937]
delays. In San Francisco, sometimes
they even came the
[940]
next day. They still don't
come anywhere close to
[944]
Amazon when it comes to
the selection of items that
[947]
you can get through online
and get to your house
[950]
within one or two days.
[951]
So I think right now Walmart
and Amazon are locked in
[955]
a steel cage death match
to become the country's
[958]
everything store. So what does
Walmart have planned as
[961]
it continues trying to
catch Amazon in e-commerce?
[964]
For example, Walmart launched
its own voice assistant
[967]
called Ask Sam in July for
employees to use to help
[970]
shoppers find products and
prices in stores.
[973]
They're trying to find ways
to use those physical
[976]
stores in new ways.
[978]
Not just distribution, but
also, you know, they're
[981]
talking about medical and
financial and edge computing
[985]
and all of these other
things that really leverage the
[987]
stores. For now, the launch
of Walmart Plus has
[991]
analysts hopeful that one day
it could at least
[993]
provide a second option for
Amazon customers to turn
[996]
to. Amazon has set a very
high bar, but they've also
[1000]
given people the playbook
to kind of follow.
[1004]
And then once you figure
out how to integrate online
[1006]
into your stores, there's
immense profitability as
[1010]
well for the
brick-and-mortar guys.
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