When Elephants Fight: The Great Wal-Mart-Amazon War of 2013

ByTom Gara

Yesterday Corporate Intelligence spoke with the WSJ’s Paul Vigna about competition heating up between two American retail giants, Wal-Mart and Amazon. Wal-Mart has a well-earned reputation for mercilessly undercutting its rivals, running on razor-thin margins enabled by its vast scale. Mom-and-pop stores trying to compete with it are often left in the dust.
That just happens to be a pretty accurate description of Amazon as well, only Amazon is busy squeezing the margins in plenty of places other than just retailing: from streaming movies to tablet computers and cloud computing, the company’s entrance to an industry is typically followed by a price that is well below its competitors.
So Wal-Mart and Amazon seem somehow destined to collide, and now, Wal-Mart is loading the cannons for battle:

As the WSJ’s Shelly Banjo wrote earlier this week, Wal-Mart is promoting a series of new digitally-focused services that seem to have Amazon in their crosshairs:

The retailer will install lockers in a dozen stores this summer, and customers will be able to order goods online and pick them up in a pre-assigned locker 24 hours a day. Amazon launched a similar service in stores two years ago, to help combat failed package delivery and compete with traditional physical retailers.
Wal-Mart’s updated mobile app will soon let customers clip digital coupons that will be automatically applied as shoppers pay for their purchases at self-checkout counters. The app also allows customers to create shopping lists and locate store-specific products by aisle.
Shoppers will also be able to load gift cards on to their smartphones and checkout in store, a move that represents the Wal-Mart’s further foray into a mobile payment service that will allow customers to turn their smartphones and tablets into devices for making purchases.

Also on the cards is using its retail stores the way Amazon uses its warehouses: Wal-Mart staff will pick online orders off shelves, pack them and send them to customers. That’s a pretty big deal, because as Banjo reported, two-thirds of all Americans live within a five-mile drive of a Wal-Mart store – an asset even Amazon can’t compete with.
The retailer is even thinking of more adventurous steps into the online economy to enable rapid delivery of orders, Reuters reports today:

Wal-Mart Stores Inc is considering a radical plan to have store customers deliver packages to online buyers, a new twist on speedier delivery services that the company hopes will enable it to better compete with Amazon.com Inc.
Tapping customers to deliver goods would put the world’s largest retailer squarely in middle of a new phenomenon sometimes known as “crowd-sourcing,” or the “sharing economy.”

The idea is still in its early stages, Reuters reports, and would obviously require the company to jump through an inordinate number of hoops to comply with local laws and regulations.
But the thinking shows how seriously Wal-Mart is taking the challenge of an aggressively expanding Amazon. When elephants fight, so the saying goes, the grass gets hurt, and a fight between the two elephants of American retail will be a sight to behold. Grass will be trampled, prices will be cut, and shoppers might just find themselves loading somebody else’s groceries into the trunk alongside their own.