December 7, 2017

ONLY THE PARANOID SURVIVE: What’s Driving Walmart’s Digital Focus? Paranoia, Top Exec Says.

For quite some time, Walmart, No. 1 on Fortune’s Global 500 list of the world’s largest companies with $486 billion in sales last year, has been working to adjust its strategy to reckon with the threat posed by Amazon.com.

The so-called Everything Store had more than 50% of all online retail sales in the U.S. last year and continues to expand at a blistering pace. With its acquisition earlier this year of Whole Foods, Amazon served notice that it is bringing the fight for consumers to Walmart on its own turf—physical stores. Amazon’s market value has risen above $550 billion, significantly above Walmart’s stock market value of around $290 billion despite strong returns for Walmart’s shares this year.

In China, Walmart now has another potent competitor getting into the stores business: Chinese online retail titan Alibaba.

Alibaba announced in November that it was investing $2.9 billion to acquire a 36% stake in Chinese hypermarket operator Sun Art, which has some 400 stores in China similar in scale to Walmart’s superstores. As with Amazon and Whole Foods, Alibaba plans to create a connected retail experience for shoppers between their smartphones and their neighborhood stores.

It’s the same strategy Walmart is pursuing, but in reverse: Amazon and Alibaba want to bring their huge customer bases into stores; Walmart wants to persuade the shoppers who frequent its nearly 12,000 stores globally to do more of their digital shopping with Walmart as well.

Walmart’s online experience is much improved, but Amazon still enjoys amazing customer lock-in with its combination of Prime membership and one-click ordering.