Wal-mart anx­ious to com­bat Ama­zon's lead

The Pak Banker - - COMPANIES/BOSS -

Wal-Mart Stores Inc. (WMT) is "anx­ious" to take on Ama­zon.com Inc.'s Mar­ket­place, where in­de­pen­dent mer­chants sell mil­lions of prod­ucts.

Ac­cord­ing to min­utes from a Feb. 1 of­fi­cers meet­ing led by U.S. Chief Ex­ec­u­tive Of­fi­cer Bill Simon, Wal-Mart con­sid­ers Mar­ket­place Ama­zon's "num­ber one weapon."

"This is an area" Wal-Mart is "anx­ious to com­pete in," ac­cord­ing to the min­utes, which were ob­tained. Par­tic­i­pants at the meet­ing also fo­cused on the sav­ings Ama­zon has cap­tured by of­fload­ing ship­ping costs to its army of in­de­pen­dent sellers.

Four years af­ter start­ing its own ver­sion of Mar­ket­place -- called Mar­ket­place -- Wal-Mart has signed up six out­side mer­chants, in­clud­ing one that sells sports mem­o­ra­bilia. Ama­zon has 2 mil­lion that sell ev­ery­thing from cloth­ing to mo­bile phone cases. More and more Wal-Mart cus­tomers are shop­ping at Ama­zon, ac­cord­ing to re­search and con­sult­ing firm Kan­tar Re­tail. Yet Wal-Mart con­tin­ues to pour cap­i­tal into its brick-and-mor­tar op­er­a­tions. This year the world's largest re­tailer plans to open about 130 su­per­centers, which Simon called Wal-Mart's "pri­mary growth ve­hi­cle" in an earn­ings call last month.

"I can think of bet­ter in­vest­ments for the long-term when this is 2013 and the big­gest com­peti­tor is Ama­zon (AMZN)," said Leon Ni­cholas, Kan­tar's Bos­ton-based se­nior vice pres­i­dent. "I don't think there's any­one who would ar­gue that the su­per- cen­ter is the store of the fu­ture."

Re­tail­ers from Wal-Mart to Sears Hold­ings Corp. (SHLD) to Best Buy Co. are strug­gling to re-in­vent them­selves as con­sumers in­creas­ingly shop on the Web. U.S. on­line sales grew more than 17 per­cent be­tween 2011 and 2012, more than four times faster than over­all re­tail sales, ac­cord­ing to Kan­tar.

The min­utes of the Feb. 1 meet­ing show how closely Bentonville, Arkansas-based Wal-Mart is mon­i­tor­ing its Seat­tle- based ri­val. In a sec­tion headed "Ama­zon Up­date," the min­utes said the on­line re­tailer's com­pe­ti­tion was "get­ting bet­ter" and that EBay Inc. and Google Inc. were ramp­ing up their ef­forts to take on Ama­zon.

David To­var, a Wal-Mart spokesman, de­clined to com­ment on the con­tents of the min­utes, while Ravi Jari­wala, a Wal-Mart spokesman based in San Bruno, Cal­i­for­nia, said the com­pany was tak­ing a "thought­ful ap­proach" to its Mar­ket­place strat­egy.

Pia Arthur, an Ama­zon spokes­woman, didn't re­turn e-mails seek­ing com­ment.

In the fourth quar­ter of 2012, 53 per­cent of Wal-Mart cus­tomers said they also shopped on Ama­zon, com­pared with 47 per­cent a year ear­lier, ac­cord­ing to data from Kan­tar. Six years ago, only about a quar­ter of Wal-Mart cus­tomers shopped at Ama­zon.

In the past five years Wal-Mart shares have gained 45 per­cent, while Ama­zon has more than quadru­pled.

More than 12 years af­ter open­ing its Web store, Wal-Mart gen­er­ates about $5.15 bil­lion, or 2 per­cent, of its to­tal an­nual sales on­line, ac­cord­ing to Kan­tar, which is based in Lon­don. Ama­zon's North Amer­i­can sales last year: $34.8 bil­lion.

In an in­ter­view, Jari­wala de­fended Wal-Mart's em­pha­sis on su­per­centers, say­ing that the lo­ca­tions dou­ble as distri­bu­tion and pickup cen­ters for mer­chan­dise bought on the Web. Half of or­ders placed on­line are picked up at the stores, which saves on ship­ping costs, he said.

Wal-Mart opened its own ver­sion of Mar­ket­place in 2009 yet "most peo­ple don't even re­al­ize it ex­ists," said Ni­cholas.

Jari­wala ac­knowl­edged WalMart's ret­i­cence to pro­mote Mar­ket­place and said: "We need to make en­hance­ments and im­prove­ments to our e-com­merce plat­form first."

While he said Mar­ket­place is "a big part of our ex­pan­sion," Jari­wala de­clined to say how many mer­chants will be added or what they'll sell. Wal-Mart's third- party mer­chants in­clude eBags, Shoe­buy.com and ToolKing.com. "We are very se­lec­tive," he said. "We choose mer­chants with high-qual­ity prod­ucts and high­level cus­tomer ser­vice."

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