WALMART VS. AMAZON
September 20, 2006
by: jovial_cynic
by: jovial_cynic
What is it about food and toilet cleaning products that makes a person more inclined to shop in a physical store than through an online retailer?
With books, music, and movies, the longtail effect is easily understood and accepted, because those kinds of things are typical online purchases. But something stops us short of buying underwear, soap, toothpaste, and a box of Tide detergent online, even though there's no need to "try them on" in the way required if you were buying a new coat or pants.
Is it the item-cost/shipping-cost relationship? Is it because we're only buying toilet paper because we ran out today, and can't wait for shipping? If we overcome whatever might be the issue, is online retail of this nature a viable business?
John Fleming, chief marketing officer for Walmart, doesn't seem to think so. Instead of working towards a stronger online retail presence, Fleming wants to utilize walmart.com to drive more traffic to the store, stating that the online presence is "more of tool to drive loyalty than a key engine of commerce."
Walmart's online store generates a fraction of Amazon.com's revenue of $10 billion, but Walmart itself pulls in $300 billion, making competition from Amazon "meaningless," as Fleming stated at AMD's recent Global Vision Conference.
It's hard to say that a $300 billion company is making poor financial decisions. And it's hard to say if the online market drives traffic away from the physical stores, or if it just causes people to buy more goods and services in additional to their in-store underwear and soap shopping. If that's the case, Flemming is on the right track... but if not, Walmart's revenue is certainly going to show it.
With books, music, and movies, the longtail effect is easily understood and accepted, because those kinds of things are typical online purchases. But something stops us short of buying underwear, soap, toothpaste, and a box of Tide detergent online, even though there's no need to "try them on" in the way required if you were buying a new coat or pants.
Is it the item-cost/shipping-cost relationship? Is it because we're only buying toilet paper because we ran out today, and can't wait for shipping? If we overcome whatever might be the issue, is online retail of this nature a viable business?
John Fleming, chief marketing officer for Walmart, doesn't seem to think so. Instead of working towards a stronger online retail presence, Fleming wants to utilize walmart.com to drive more traffic to the store, stating that the online presence is "more of tool to drive loyalty than a key engine of commerce."
Walmart's online store generates a fraction of Amazon.com's revenue of $10 billion, but Walmart itself pulls in $300 billion, making competition from Amazon "meaningless," as Fleming stated at AMD's recent Global Vision Conference.
It's hard to say that a $300 billion company is making poor financial decisions. And it's hard to say if the online market drives traffic away from the physical stores, or if it just causes people to buy more goods and services in additional to their in-store underwear and soap shopping. If that's the case, Flemming is on the right track... but if not, Walmart's revenue is certainly going to show it.
