Walmart builds alliances to battle Amazon
Battling Amazon isn’t easy — even for the world’s largest retail chain.
Fear of Jeff Bezos helps explain why Walmart has in recent years forged alliances with Google, Microsoft, China’s JD.com and other tech players. The members of the unofficial coalition all share a common goal: preventing Amazon from ruling the digital galaxy. It’s like a movie in which a ragtag alliance faces down an all-powerful foe, only in this case the plucky rebels also happen to be some of the world’s most powerful companies.
Walmart has created a formidable e-commerce business by investing billions to hire engineers and data scientists, building automated distribution centers tailored for web orders and rolling out curbside pickup for online grocery orders at more than 2,000 stores. The retailer generated $11.5 billion in online sales last year in the U.S., and a redesigned website that better showcases apparel and home decor is expected to boost that total by 40 percent in 2018.
But Walmart knows it can no longer go it alone. Amazon.com now captures 49 percent of the U.S. e-commerce market, according to researcher EMarketer Inc., up from 43.5 percent last year. Amazon already dominates entertainment and toys and is now pushing into areas that are dear to Walmart. The acquisition of upscale grocer Whole Foods Market last year threatens a business that makes up more than half of Walmart’s U.S. sales.
The Amazon menace has prompted a strategic shift inside Walmart’s headquarters.
“It’s the classic build-or-buy conundrum,” says Sucharita Kodali, an analyst at Forrester Research Inc. “Walmart needs to innovate, but it just doesn’t make sense for it to build much of it in-house.”
Historically, the massive retailer has been reluctant to cozy up with others, preferring to keep the benefits of any new venture to itself. The company’s track record with partnerships isn’t great: Walmart’s first alliances in the key markets of India and China, for instance, were eventually abandoned.
Walmart has studied those setbacks. “We’re learning to partner with others in new ways,” Chief Executive Officer Doug McMillon has said.
Take Google. A pact forged last year allows Walmart customers to link their store accounts to Google’s Express shopping service and-in a clear effort to counterbalance Amazon’s Echouse voice-activated Google Home devices to buy everything from groceries to garden hoses.
The purchase histories of Walmart shoppers will help Google make personalized recommendations, a key feature needed to make voice-activated shopping more than a novelty.
The deal was a big step for Walmart, which tends to guard customer data fiercely. But it was a necessary way to create an alternative to Amazon’s voiceactivated speakers that play music, turn on air conditioners and, of course, handle shopping orders. It also showed how the battleground has shifted from prices-something Walmart knows well-to convenience.
“For today’s customer, the experience we create has to be easy, fast, friendly and fun,” said Greg Foran, CEO of Walmart U.S.