Is Walmart Winning the Online Retail Wars?
Here is something that should shock Amazon.com (NASDAQ: AMZN) fans: Walmart Stores Inc. (NYSE: WMT) seems to be beating the Everything Store in the current round of the online retail wars. The latest battle—the July 15 Prime Day Sale designed to celebrate Amazon’s 20th anniversary—turned out to be something of an embarrassment for Jeff Bezos’ company and a win for Walmart.
Yahoo Finance’s Rick Newman evaluated Amazon and Walmart.com’s Prime Day performance in four categories: Name Brands, Relevance, Pricing, and Shopping Experience. Walmart.com outperformed Amazon in every category, as you can see. Walmart’s final score was 14 and Amazon’s eight.
On Prime Day, Amazon offered shoppers a poor selection, a confusing pricing strategy, a limited number of name brands, and a poor shopping experience, Newman noted. He also found that Walmart.com was simply easier to use. Amazon’s Lightning Pricing made it hard for customers to tell what the actual prices were.
According to Newman, Amazon’s Prime Day had a bargain basement feel to it with come and go deals, lots of off brand merchandise and deals on unusual items. Yet perhaps the most damning criticism of the online pioneer was this comment:
“Walmart offered a lot of mainstream products typical families can use, while Amazon offered a strange collection of miscellanea that could have come from some gigantic leftover bin,” Newman wrote. He pointed out that Walmart was offering specials on toilet paper and cribs while Amazon was promoting bargains on anti-callous gloves, 55-gallon barrels of industrial lubricating oil and Fifty Shades of Grey DVDs.
Social Media Hates Prime Day
Newman was not alone in his criticism of Amazon’s Prime Day performance. Ad Age reported that Social Media was filled with gripes like this one:
“I’m starting to think #PrimeDay wasn’t really intended for me,” MaryCatherine Finney complained on Twitter. “There’s a waitlist to save 25% on GARBAGE BAGS.”
The complaints include that items sold out fast and could not be loaded onto shopping carts. Many customers were also annoyed by Amazon’s lighting pricing, which appeared and disappeared at random.
Amazon’s Pyrrhic Victory
Although, Prime Day was a success from a volume standpoint; Amazon’s U.S. sales rose by 80%, and its European sales rose by 40% on July 15, Ad Age reported. Amazon may have won a pyrrhic victory by sacrificing customer loyalty for sales.
It looks like Amazon messed up big time on Prime Day. It turned an opportunity for good publicity into a debacle that boosted its deadliest rival. A Walmart spokesman told Internet Retailer that the number of customers picking up items ordered online from his stores tripled on Prime Day. That means Prime Day even helped boost Walmart’s sagging foot traffic.
Walmart did have a few problems on Prime Day however. Walmart.com was running slowly; it took 7.68 seconds to load on July 15 while Amazon.com took just 3.18 seconds to load, Catchpoint Systems reported. Walmart.com also almost crashed; Ad Age reported that some customers got an error message when they tried to enter the site.
Is Walmart.com Bigger Than Alibaba?
Now for something else that really surprised me: There is some evidence that Walmart.com could be generating more revenue than all of Alibaba Holdings Group’s (NYSE: BABA) operations.
“Globally, we expect to finish this year with approximately $12.5 billion in e-commerce sales,” Walmart executive vice president and chief executive officer Charles Holley said on Oct. 15, 2014. Alibaba reported a TTM revenue figure of $12.33 billion on March 31, 2015, according to Ycharts.com.
If Holley is correct, Walmart.com’s revenues could exceed those of Alibaba. Walmart could be making more money from its online operations than Alibaba is. It is hard to tell because Walmart does not release detailed information about its online sales.
Internet Retailer estimated Walmart’s online sales for 2014 at $12.126 billion. If that figure is true, Walmart.com’s revenues are slightly lower than those of Alibaba.
What’s more, Walmart.com could be growing at a staggering rate. Holley predicted that his company’s ecommerce sales could grow by 25% in 2016 and 30% to 40% in 2017 and 2018. Those words might come true, which you’ll see if you take a look at the ecommerce system Walmart is building.
Walmart’s Ecommerce System
Walmart has been making some massive investments in online retail. It plans to open four new fulfillment centers dedicated to ecommerce in the U.S. this year.
Each of those centers will be more than one million square feet in size and hold around 500,000 items, The Wall Street Journal reported. Those are in addition to 11 smaller fulfillment centers and 83 supercenters with online shipping capacity that Walmart runs in the United States.
The new fulfillment centers are part of an aggressive expansion of online retail capabilities underway at Walmart. A press release indicates that it plans to spend $1 billion on ecommerce upgrades this year and $1.2 to $1.5 billion in 2016.
This means Walmart already has an ecommerce ecosystem that rivals Amazon’s. It looks like the world’s largest retailer could be positioning itself to be one of the leaders of online retail, although it will take a while for Walmart to catch up with the Everything Store. Amazon reported a TTM revenue of $91.96 billion on March 30, 2015; Walmart is hoping that its online sales will reach $35 billion by 2018, which is still a respectable number.
Even if it doesn’t achieve its goals, Walmart has won some impressive victories in the online retail wars. Amazon needs to pay close attention because the Behemoth from Bentonville has demonstrated it has the capability to win in the ecommerce arena.
Disclosure: your blogger conducts some retail book sales through Amazon.com.