Traditional retail in the United States, the kind you find at the malls, and urb

Question

Traditional retail in the United States, the kind you find at the malls, and urban department stores, is in trouble. The very large retailers such as Wal-Mart, Macys, Kohl’s, Sears, and Nordstrom all have reported about 1% to 2% sales growth since the recession of 2008. In 2016, Target, Macys, Sears, JCPenny, and others are closing hundreds of stores. Since 2000, consumers have been shifting away from traditional retail goods like apparel and electronics (the mainstays of retail stores), and buying more services like vacations, exercise, dining, and health care. The much bigger threat to traditional retail is coming from online retail, mostly Amazon, that has gobbled up the lion’s share of online retail (about 25% of all online retail), and has been growing at astounding rates like 15% to 20% a year since 2008. Apparel and electronics are also the largest sales items for online retailers, so the physical stores and the online giant all compete selling the same goods. Traditional retailers have spent over a billion dollars in the last decade trying to become online retailers, and meet consumers wherever they want to buy, online, or at the store. It’s called an “omnichannel” strategy: using multiple channels like physical stores and online Web and mobile apps to sell products. Many traditional large retailers such as Wal-Mart, Macys, and Costco, have wound up in the top ten online retail rankings. But so far the omnichannel strategy has not been especially successful in keeping up with Amazon’s growth. In what promises to be the online battle of the decade, the two biggest players, the heavy weights, Wal-Mart and Amazon, are going head to head for the consumer dollar. In a broader sense, it’s the online-business model versus the physical- department-store business model, which was invented by Macy’s in 1870. But to be fair to the traditional retailers who have developed their online and mobile sales channel, it’s more accurate to say it’s the omnichannel model versus the pure-online digital model of Amazon. Here’s how the two heavy weights shape up. Wal-Mart’s revenues in 2015 were $485.6 billion (the largest Fortune 500 company), it had earnings of $15 billion (about a 3% margin), and e-commerce sales of 13.7 billion (around 3% of total sales revenue). Wal-Mart has about 5,200 stores of all kinds in the U.S. It produces around $15 billion in free cash flow a year, and has about $9 billion cash on hand. In 2016 Wal-Mart’s market value is in the area of $230 billion. Its sales growth in 2015 was 1.8%. Wal-Mart employs about 2.1 million people (1.4 million in the U.S. alone), making it the largest employer in the world and the U.S. That works out to $231,000 of revenue for each employee. Amazon’s revenues in 2015 were $107 billion (the largest e-commerce company, but only 35 in the Fortune 500), it had earnings of $596 million (about a 1.8% margin), and e-commerce sales of $92 billion. Amazon has about $8 billion in cash on hand. In 2016 Amazon’s market value is about $366 billion, and its sales growth in 2015 was about 20%. Amazon employs about 222 million people. That works out to $481,000 of revenue for each employee. The retail battle of the decade shapes up as a contest between a giant traditional retailer that is growing very slowly and has only a tiny online presence, versus the largest online retailer, which is growing very rapidly, and has no physical store presence. Both companies have significant financial assets, and nearly limitless credit; to build or acquire whatever capabilities they choose. Wal-Mart needs to develop new systems and capabilities both in-house, and through acquisitions. In 2016 Wal-Mart bought the start up Jet.com, and small but fast-growing Amazon competitor.

Summary: In what promises to be the retail battle of the decade, Wal-Mart and Amazon are going head-to-head for the retail consumer dollar. Wal-Mart brings to the fray the largest physical retail presence in the U.S., and the world. But it has lacked a powerful online presence. Amazon brings to the fray the largest online retail presence in the United States and is second only to Alibaba in China. But Amazon lacks a physical footprint in retail commerce. Wal-Mart is moving towards an omnichannel approach that combines online and offline retail, while Amazon is emphasizing same-day delivery, local drop-off boxes, and may well introduce local physical stores in the future.

Answer the following questions:

1. How is Wal-Mart utilizing omnichannel as a strategy to compete against Amazon?

2. How is Wal-Mart’s acquisition of Jet.com going to help Wal-Mart in terms of e-commerce?

Explanation / Answer

Walmart has been very successful in delivering its services in international markets as they are using advanced forecasting techniques and proper managerial system which is backed by advancement in digital technology and other implementations. This type of approach definitely enables Walmart to be more productive towards the specific industry and to capture large amount of market from the same. Walmart business structure directly enables it to invest using foreign direct investment to generate better revenues from the same Market by operating in competition with the local retail Supermarket. As Walmart has extremely aligned logistics operations, as you can see Walmart has successfully created more intuitive working environment for the company at a global scale by developing a multinational organisation pattern.

Walmart is using omnichannel approach as their main strategy for competing against Amazon. By getting linked with many of the organisation as well as providing their own operating structure running across different mediums is one of the main strategies of Walmart to maintain competitive advantage in the specific market segment. This type of approach has provided company a separate brand identity in cost differentiation where availability of the products is directly related to having better cost and opportunities. 5 limitation of The E-Commerce distribution centres and using state of the art facilities for the specific sorting systems, walmart has definitely maintained better benefits in the specific Cooperative marketing environment increasing the impact of available operational capabilities as well as implementation of such a specific program where multi-channel approach is more feasible. In the online industry Amazon is definitely at a very far point from where the availability of options for Walmart is relatively very low as Amazon has as big as 6 times the operating structure of Walmart over e-Commerce life

Acquisition of jet.com created a negative impact on the overall availability of shares for Walmart. It faced a loss of 31 billion dollars in market cap after acquisition of jet.com. Implementation of search strategy of acquiring jet.com as a platform for e-business Walmart directly creating a better impact of availability for delivering the products to the customers.
This is specific collaboration would definitely help Walmart to understand complications in The E-Commerce in as provide positive approach for selling their products online without setting up their own structure and using Jet.com is there mean operational tool for implementation of such specific strategy for acquiring a space in e-commerce market.

Related Questions

Navigate

• Browse (All)
• Browse T
• Subjects

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.