The opening vignette Amazon vs Walmart (SEE ATTACHED) deals with a unique price and value strategy. Think of two (other) restaurants that utilize unique price and value strategies and defend your answers. Be specific.
Your reply must be at least 500 words PLUS at least 2 references to support your answer. You must use correct APA format (Times Roman 12 pt font and 1″ margins). Submit your paper as an attachment.
“AMAZON VS. WALMART: A Price War for Online Supremacy “Walmart to Amazon: Let’s Rumble” read the headline. Ali had Frazier. Coke has Pepsi. The Yankees have the White Sox. And now, the two retail heavyweights are waging a war all their own. The objective? Online supremacy. The weapon of choice? Prices, at least for now—not surprising, given the two combatants’ long-held low-cost positions. Each side is formidable in its own right. Walmart dominates offline retailing. It’s price-driven “Save money. Live Better.” positioning has made it far and away the world’s biggest retailer, and the world’s largest company to boot. In turn, Amazon is the “Walmart of the Web”—our online general store. Although Walmart’s yearly sales total an incredible $469 billion, more than 6.3 times Amazon’s $75 billion annually, Amazon’s online sales are 7.5 times greater than Walmart’s online sales. By one estimate, Amazon captures a full one-third of all online buying worldwide. Why does Walmart worry about Amazon? After all, online sales currently account for only about 5 percent of total U.S. retail sales. Walmart captures most of its business through its more than 11,000 brick-and-mortar stores—online buying accounts for only a trifling 2 percent of its total sales. But this battle isn’t about now, it’s about the future. Although still a small market by Walmart’s standards, online sales are growing at three times the rate of physical-world sales. Within the next decade, online and mobile buying will capture as much as a third of all retail sales. Because Amazon owns online, its revenues have soared an average of almost 30 percent annually over the past three years. Meanwhile, Walmart’s earthbound sales have grown at less than 5 percent a year during that period. At that rate, Amazon’s revenues will reach $100 billion within the next year, reaching that mark faster than any other company in history. Walmart, the world’s largest retailer, and Amazon, the world’s largest online merchant, are fighting a war for online supremacy. The weapon of choice? Prices, at least for now. But in the long run, winning the war will take much more than just low prices. Amazon has shown a relentless ambition to offer more of almost everything online. It started by selling only books, but now sells everything from books, movies, and music to consumer electronics, home and garden products, clothing, jewelry, toys, tools, and even groceries. Thus, Amazon’s online prowess now looms as a significant threat to Walmart. If Amazon’s expansion continues and online sales spurt as predicted, the digital merchant will eat further and further into Walmart’s bread-and-butter store sales. But Walmart isn’t about to let that happen without a fight. Instead, it’s taking the battle to Amazon’s home territory—the Internet and mobile buying. It started with the tactics it knows best—low costs and prices. Through aggressive pricing, Walmart is now fighting for every dollar consumers spend online. If you compare prices at Walmart.com and Amazon.com, you’ll find a price war raging across a broad range of products. Low costs and prices are in the company’s DNA. Through the years, Walmart has used its efficient operations and immense buying power to slash prices and thrash one competitor after another. But Amazon is not like most other competitors. Its network is optimized for online shopping, and the Internet seller isn’t saddled with the costs of running physical stores. As a result, Amazon has been able to match or even beat Walmart at its own pricing game online. The two giants now seem pretty much stalemated on low prices, giving neither much of an advantage there. In fact, in the long run, reckless price cutting will likely do more damage than good to both Walmart and Amazon. So, although low prices will be crucial, they won’t be enough to win over online buyers. Today’s online shoppers want it all, low prices and selection, speed, convenience, and a satisfying overall shopping experience. For now, Amazon seems to have the upper hand on most of the important nonprice buying factors. Its made-for-online distribution network speeds orders to buyers’ homes quickly and efficiently—including same-day delivery in some markets. Amazon’s online assortment outstrips even Walmart’s, and the Web wizard is now moving into groceries, an area that currently accounts for 55 percent of Walmart’s sales. As for Amazon’s lack of physical stores—no problem. Amazon’s heavily used mobile app lets customers shop Amazon.com even as they are browsing Walmart’s stores. Finally, Amazon’s unmatched, big data-driven customer interface creates personalized, highly satisfying online buying experiences. Amazon regularly rates among the leaders in customer satisfaction across all industries. By contrast, Walmart came late to online selling. It’s still trying to figure out how to efficiently deliver goods into the hands of online shoppers. As its online sales have grown, the store-based giant has patched together a makeshift online distribution network out of unused corners of its store distribution centers. And the still-mostly-store retailer has yet to come close to matching Amazon’s online customer buying experience. So even with its impressive low-price legacy, Walmart finds itself playing catch-up online. “We’re starting to gain traction,” says Walmart’s CEO, but “we still have a long ways to go.” To catch up, Walmart is investing heavily to create a next-generation fulfillment network. Importantly, it’s taking advantage of a major asset that Amazon can’t match—an opportunity to integrate online buying with its massive network of brick-and-mortar stores. For example, Walmart is experimenting with fulfilling online orders more quickly and cheaply by having workers in stores pluck and pack items and mail or deliver them to customers’ homes. Two-thirds of the U.S. population lives within five miles of a Walmart store, offering the potential for 30-minute delivery. And by combining its online and offline operations, Walmart can provide some unique services, such as free and convenient pickup and returns of online orders in stores (Walmart’s site gives you three buying options: “online,” “in-store,” and “site-to-store”). Using Walmart’s Web site and mobile app can also smooth in-store shopping. They let customers prepare shopping lists in advance, locate products by aisle to reduce wasted shopping time, and use their smartphones at checkout with preloaded digital coupons applied automatically. Customers who pick up online orders in the store can pay with cash, opening up online shopping to the 20 percent of Walmart customers who don’t have bank accounts or credit cards. For customers who do pay online, Walmart is testing in-store lockers where customers can simply go to an assigned locker for pickup. Who will win the battle for the hearts and dollars of online buyers? Certainly, low prices will continue to be important. But achieving online supremacy will involve much more than just waging and winning an online price war. It will require delivering low prices plus selection, convenience, and a world-class online buying experience—something that Amazon perfected long ago. For Walmart, catching and conquering Amazon online will require time, resources, and skills far beyond its trademark everyday low prices. As Walmart’s president of global e-commerce puts it, the important task of winning online “will take the rest of our careers and as much as we’ve got [to invest]. This isn’t a project. It’s about the future of the company.”1”
