Wars Of Grocery Stores: Case Study Of Amazon And Walmart
Walmart is a retail giant with thousands of stores around the globe, it buys products in bulk from suppliers and sells it to consumers for a competitive price. It has around 11000 stores and focuses on long term relationship with suppliers. It follows inventory management technique called cross-docking, where product is received from supplier, docked at distribution center and then delivered to the stores. Its slogan is “Save money, Live Better”, and spends billions on marketing through traditional and digital channels.
For the competitive force model, Walmart’s suppliers have low bargaining power because Walmart is a giant retailer and holds power. The bargaining power of the buyer is also low because they already offer items at a cheap price and customers are unlikely to find the same product at a lower price. It also has a low threat from substitute products because Walmart offers one the lowest price giving them a competitive edge. Been the biggest retail brand its also has low threat from new entrants. However, the competitive rivalry among the existing player is moderate because it has quite of bit of competitors like Target, Best Buy, Amazon and Costco but don’t pose a major threat because it has competitive edge in term of price strategy.
Amazon is an e-commerce titan which operates without any physical store expect for its acquisition in Whole Food which has stored all over USA. Amazon main strategy is selling directly to consumer, but also work as a middle man between other sellers and takes a cut from them. Generally, Amazon doesn’t focus on long term relationship with suppliers. Amazon usually relies on UPS and FedEx for its deliveries but has recently leased 20 Boeing 767 to take delivery operation into their own hands. Amazon main slogan is “Work Hard. Have Fun. Make History.” and provides value to consumers by offering exceptional customer service.
For the competitive force model, Amazon’s suppliers have low bargaining power because Amazon is a giant in e-commerce space and for sellers to get a space they must give Amazon a cut. The bargaining power of the buyer is also low because the price is also pre-set and cannot be bargained with. Amazon does have much threat from substitute products because it acts as a middle man and is the biggest e-commerce in North America. Been the biggest e-commerce it has a minimal threat from new entrants. However, the rivalry is high among the existing player like Alibaba its cheap counterpart from China. It also has physical retailers like Walmart, Best Buy as a competitor because of grocery and electronics. As Amazon acquires new markets its competitors are going to grow.
The Role of Grocery Sales
Grocery shopping contributes to $800 Billion in Sales in U.S.A, and both Amazon and Walmart want to be the biggest grocery sales in the country. Amazon bought Whole Food in 2016 to penetrate the grocery market and become a dominating physical presence. Amazon does this by using Whole Food pre-existing prime locations which can be used as distribution point to get closer to the customers. Whole Food also adds a sign of authenticity to Amazon’s grocery programs like Amazon Go. Using grocery Amazon want to become a “life bundle” for consumers, where they can get everything, they may need including groceries through one site.
The role of grocery sales is completely different in the case of Walmart’s business strategy as they want to expand into e-commerce in order to compete with Amazon. Walmart already contributes up to 18% of America’s grocery market and in order to meet its goal of 40% growth in online sales it must expand online and invest in technology. Grocery sales also account for 56% of Walmart’s totals sales and if it loses the grocery battle against Amazon it has no chance of overtaking Amazon in as world largest e-commerce player.
The Role of Information Technology
Information technology plays a major role in Amazon and Walmart expansions, as both companies use technology to improve customer experience and convenience. Amazon has developed and implemented technology for stores which lets customer pay without waiting in lines as this reduces the cost of hiring cashiers and other workers for their stores. Amazon also offers two-hour delivery program with Amazon Fresh and Whole Foods serves as an Amazon depot for grocery. By introducing such It into its strategy Amazon fulfill its purpose by providing “customer convenience” leading consumer’s grocery inside their house, to meet consumer expectation of fresher items, personalized items, and use of technology for better food buying experience.
Walmart has also started investing and implement technology like scanning and paying for the items, click and collect and stand-alone grocery pick up sites into its stores to fulfill the customer's needs. It has also partnered with Uber for same-day grocery deliveries to compete with Amazon’s delivery program. Walmart has also been rolling out its order and pickup service, and by doing so Management hopes the growth of Walmart will continue by offering consumer convenience using technology to its customers.
Conclusion
I believe that Amazon will dominate grocery retailing for many reasons. One of the main reasons is Amazon is skilled at completing at low prices and delivering product faster than any of its competitors. Nowadays people are too busy to go out and shop for food. Amazon solves this problem by delivering grocery to its customers within two hours. It also has other developing and like Amazon Go where shopper doesn’t have to check out their purchases using their mobile app and sensors in the stores. As the world moves toward “customer convenience”, Amazon will dominate grocery retailing because its ability to provide easy and quick deliveries and providing discounted prices on almost everything with Amazon Prime.
References
- Pratap, A. (2018, December 22). Walmart Five Forces Analysis. Retrieved from https://notesmatic.com/2017/02/walmart-five-forces-analysis/.
- Pratap, A. (2018, December 22). Walmart Five Forces Analysis. Retrieved from https://notesmatic.com/2017/02/walmart-five-forces-analysis/.
- Dudovskiy, J., & Dudovskiy, J. (2018, August 5). Amazon Value Chain Analysis - Research-Methodology. Retrieved September 29, 2019, from https://research-methodology.net/amazon-value-chain-analysis/.
