Walmart Spikes, Is Amazon Doomed?
The Market Ticker - Commentary on The Capital Markets
2017-10-12 07:00 by Karl Denninger
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Walmart Spikes, Is Amazon Doomed?
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Walmart has said they expect a 40% e-commerce increase (in dollar terms) over the next 12 months.

Here's my view on them vis-a-vis Out-Amazoning Amazon: Amazon is in trouble.  Serious trouble.

WalMart has done a lot with their online presence of late.  Further, and far more importantly, they do not charge a "subscription fee" for some "premium" tier such as Amazon does with Prime.

Why is this important?  Several reasons:

1. Walmart now handily beats Amazon for a lot of products when it comes to price.  In fact if you don't check Walmart's online listing before ordering from Amazon you are a fool and almost-certain to overpay.  It's that blatant now, and has been getting more-so over the last few months.

2. You need buy no special plan to get free delivery.  You can, as with Amazon, get free delivery to your house if you have a modest amount spent in one transaction.  However, you can also get free delivery to any of WalMart's stores irrespective of the amount of the transaction and typically the product is there in 2-3 days -- in other words, just as fast as PRIME.  WalMart will hold it at their customer service desk for about a week and you can come get it at your leisure.

Since nearly everyone in the US is within 10-15 minutes of WalMart by car and most people do stop in once a week or so this means that not only is Walmart's online presence simpler to deal with (no worries about someone picking off your package off the porch while you are at work, etc) there is no membership fee either to obtain reasonably-fast delivery.  If you do not buy PRIME Amazon will sit on an order for as much as a week (probably to both aggregate their shipments internally and try to coerce you out of $100) where WalMart instantly dispatches the product to the store you choose.

This feature also works really well if you're traveling; you can order something and have it sent to any of their stores, anywhere, and pick it up on your trip.  If something goes wrong and you don't pick it up they'll automatically return it and credit your card after a week or so of it sitting at the store unclaimed.  Try that with Spamazon, Prime or no.

Next up Walmart has announced that they intend to make returns of their internet purchases zero hassle (requiring just seconds) at any of their stores.  That's a huge win over returning something via Amazon where you typically have to go to a UPS retail outlet or similar to drop it off and deal with printing their return label.  In this case just take it with you the next time you go to Walmart, check it back in at the store and it's done.

Will this destroy Amazon's e-commerce game?  No, but it's sure as hell going to dent it.  In short Walmart has upped their game when it comes to internet commerce massively over the last year or so while Amazon has done nothing other than raise the price of Prime over the last few years.

Spamazon's acquisition of Whole Paycheck does nothing to help, since the density of Whole Paycheck outlets is both insufficient and too-concentrated in yuppie areas to make a material contribution to their distribution pipeline.

Walmart, on the other hand, is leveraging what they already have which makes their improvement in the customer experience near-zero in additional cost to them.

Walmart one, Amazon gooseegg.

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Nadavegan
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I am actively working to break my teenage children of the "Prime" Kool-Aid. For son's birthday, he priced his request on Amazon. He was so excited because with "Prime" he would get it with free delivery in 2 days!!!! I promptly took him to Ebay, where the item was $10 cheaper, had free 2 day shipping, and offered free no hassle return, all with no stupid subscription fee.

It's all marketing. Teach your kids to fight against being marketed to. They'll roll their eyes, but the point will stick.
Tickerguy
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Quote:
It's all marketing. Teach your kids to fight against being marketed to. They'll roll their eyes, but the point will stick.

Aiming such at kids ought to bring the death penalty to those who do so. Adults are responsible for themselves.

Kids -- not so much.

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Aquapura
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Since nearly everyone in the US is within 10-15 minutes of WalMart by car..

Not everyone...Wally World is definitely a drive out of my way from where I live and work. That's on me for living in a yuppie area. At any rate I think this murders Amazon on the suburban family that is buying everything from diapers to laundry detergent on Amazon because it's easy. I know several families that do this. Having a brick & mortar down the street that will take hassle free returns is gold. Most people I know have a couple whoops buys from Amazon that just collect dust since returns are such a PITA.

Quote:
If you do not buy PRIME Amazon will sit on an order for as much as a week (probably to both aggregate their shipments internally and try to coerce you out of $100) where WalMart instantly dispatches the product to the store you choose.

This is the primary reason I quit buying from Amazon. I didn't want their streaming service so $100 for expedited shipping on a dozen purchases a year just wasn't worth it. If I need it expedited I'll just pay for the shipping...from an e-commerce site that isn't Amazon...
Goforbroke
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That's a huge win over returning something via Amazon where you typically have to go to a UPS retail outlet or similar to drop it off and deal with printing their return label
PLUS, the return shipment fee which in many cases disincentivizes you from returning the item, so you just keep it.

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Whitehat
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@Tickerguy

Marketing aimed at very young children and teens has been a field of active study and implementation since the much too much honored 1950's and increasing to insanity ever since with the unknowing and sometimes active participation of adults and authority figures; culture and society are done, over.

Regarding Amazit, Walmart is considered prole or relatively down-rent in the NY Metro area. In fact in my slice of the NYC hell the political class has fought the opening of their shopping centers as a threat to local businesses, however they seem to have no problem with other mega stores. I can cross a bridge with a toll and highway driving to another state to get to my nearest store in perhaps 25 minutes traffic depending, but the other residents in other boroughs of NYC hell are faced with at least an hour trip if not impossible for them. Funny how Amazon positioned one of their most recent large distribution centers here in the city and is looking for other locations within the city limits. Amazon is practically a religion here in NYC along with Uber. Amazon's plan is probably to overcharge the city iPhone crowd who accepts the higher cost of living. NY'ers for the most part do not even bother to check prices on certain things. This is Amazit target marketing. They are seeking a captive market of convenience purchasers. Walmart if it was smart should do what some of the Japanese car manufacturers did when they created a luxury label based upon their base quality and infrastructure to target consumers who found the very good value cars not sophisticated enough.

Did not HL Mencken say something to the effect, "nobody ever went broke underestimating the intelligence of the American people."

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Tickerguy
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****cago tried for a very long time to keep WalMart out of the city as well. Walmart shrugged, opened Supercenters and Sams' all over the suburbs and buttraped all the other companies that were allegedly "insulated."

The problem this led to for Chicago is that they lost the city sales tax surcharge from those who simply went to a suburban WallyWorld!

Oops....

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Ckaminski
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Quote:
PLUS, the return shipment fee which in many cases disincentivizes you from returning the item, so you just keep it.


I've never paid for return shipping for Amazon Prime items. I feel I get my money's worth with their streaming options on top of the shipping, but I am wise to their price game. In some cases Amazon is just better to deal with than a no-namer on ebay or random Internet store. I don't delude myself that Amazon is always the better deal. It certainly isn't.

I'd really love it if Walmart could just limit searches to stock in my store of choice - I don't need to see a million items online that aren't available to me "right now" and they're uniquely positioned to do it. :-/

But I'm with Karl. I've dealt with the Walmart merchandisers and their distribution system. Amazon cannot compete with them, period. I think you're seeing the real world version of Netscape vs Microsoft playing out here, where Walmart is slow to the online game...
Themortgagedude
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I don't think they can out "Amazon" Amazon. But all they have to do is to be an alternative to Amazon. Amazon makes nothing without web services as it is. If they have to compete going forward they'll lose more than they currently do. Walmart is swimming in cash. I have for a while said a good trade would be to short Amazon and go long Walmart. That would have gotten my ass kicked for a long time now. But I still agree with the philosophy.

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Tickerguy
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AWS is a shrinking-margin business that will eventually return single-digit operating margins. It's quickly becoming commoditized and that trend will continue; there are few barriers to entry and plenty of BIG competitors already.

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Flaps10
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Walmart just won a $2.8MM suit against the city of Tacoma because they tried to keep Walmart out. It has obviously been dragged out for some time because they've been here for several years now.

There are a lot of people who blindly follow Amazon and loathe Walmart.
Als
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Amazon is great but as I said before you have to check prices at several different Internet sites. I needed a new AC compressor for one of my cars and Amazon was $100 more than Autozone and $50 more than Advance Auto for the exact same part.
Aztrader
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Walmart's main issue is their crappy website. This is the problem with most retailers today. I have distributors that have such poor search engines in them, that I end up going elsewhere due to frustration. Walmart has some of the same issues. Finding a specific product on a website can be an art. Their search engine needs to be category specific in order for customers to find the relevant products. Too many products in each master category can kill your business fast. Kind of like a restaurant with a 20 page menu.
Amazon pushes all their prime crap to the top of the page, drowning out the third party vendors. Amazon's biggest advantage is their system supports a point and click for returning customers. People have become lazy and are looking for the easiest and quickest way to shop. They sell the public that they offer the lowest prices, but we have found that if you are the only one on Amazon offering a product, that you can actually sell it for more then retail and they will buy it without checking.
Bagbalm
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Where both Amazon and Walmart (and Newegg) fail for me is with third party vendors.
If it has to be shipped from China it's an automatic no for me. They are almost as bad as eBay for knock-offs and fraud. If you buy anything like karat-gold from China and expect it to meet spec you are nuts. You're as likely to get plated as solid. Electronics you get the previous model or open box or refurb sold as new.
I just checked Walmart to see if they had some RAM for my computer. It was available shipped from a third party only - not to the store. The customer satisfaction level of the company was only 53%!
Aztrader
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Check with Tiger Direct. One of the best for electronic deals.
Flaps10
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Buying gold mail ordered from China
smiley

Thanks, I needed that
Weezie
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Although not a fan of "Walmart quality" (and labor practices), it does good to have Amazon get someone meeting them head on.

To think, Sears could have been at the pinnacle of retailing now - between their knowledge of logistics and catalog business as well as strategic store locations, they should have ****ing invented this. Instead, they just became the old man in the corner losing his marbles.

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Aquapura
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Quote:
Walmart is considered prole or relatively down-rent in the NY Metro area.


I consider Walmart down rent too but I don't really give a **** when picking up household commodities - I shop on price alone. Now I can see avoiding that place due to the people of Walmart. Most of them are just morbidly obese but for some reason Walmart attracts more freaks than Target or Costco does. If that scares you away, so be it. I'm loathe to shopping in general but it is a perfect way to see what America has become.
Jacksparrow
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I find EBay beats Amazon on pricing more often than not. I've dropped my Amazon purchases by about 80% form what they used to be. Another site I use is banggood.com. They have decent tooling for much less than other places.
Tickerguy
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I consider Walmart down rent too but I don't really give a **** when picking up household commodities - I shop on price alone

Exactly.

Who gives a **** about "down rent" when you're buying TP and paper towels? REALLY FOLKS?

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Nadavegan
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Agree with Aztrader about the website. If Walmart could get their damn website to accurately tell you what is in the store, I wouldn't shop anywhere else. Case in point: my daughter was trying to find wire shelving to construct a pet cage, so we looked on Walmart.com to see which stores had it in stock. None of the ones that indicated it had any, and 1 was grocery-only. FFS, they know in their supply chain how many Pop tarts are in each store, and what flavors. How the hell have they not integrated this into their web function yet?
Ptjim
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Pacific Northwest
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I've been an Amazon Prime customer for about 5 years and have gotten tremendous value from it. I live in the woods; the nearest WalMart, Costco, Home Depot - the nearest ANYTHING big-box and discount is 37 miles away, one way, on two-lane rural roads almost the whole distance.

So WalMart in-store pickup offers me little to nothing and I do a LOT of shopping online, up to and including a lawnmower from Home Depot and a washer/dryer set from Sears. Amazon sends stuff 2-6 times/week; I don't buy detergent or toilet paper there (that's what 2-3x/year Costco visits are for), but many items simply not available around here, or at far better prices. In addition, I use their Amazon Video (included with Prime) almost as much as Netflix and am careful to never buy/rent from them, just watch what's available at no extra charge (and everything is, sooner or later).

Whatever people think of their business model, I use the hell out of Prime for a little over $8/month and I constantly seek out best delivered prices, buying from the lowest. That means eBay, HomeDepot.com, Walmart.com and other places, but about half the time it's Amazon. The last year, I've been using Costco.com to order Keurig K-cup coffee when they have it on sale - free delivery, no sales tax and unbeatable prices on sale for Peet's and other quality vendors. Even though I roast my own coffee beans for espresso and French press, those K-cups sure are handy for a cup of coffee right-the-hell-now.

And, by the way, I check Amazon vendor options carefully - I only pay sales tax on about 10% of my purchases - the rest from third-party sellers. Even those in my state aren't charging me sales tax. Another 9% in my pocket on those purchases.

One more thing: I've bought my prescriptions only from Walmart, via online ordering and mail delivery, for about 6 years; in total they have the best prices for the generics I use. But after all these years, the Walmart online system is just TERRIBLE, especially compared to Amazon. Can't get prescription prices before the order is placed, and then only by calling and talking to a rep or waiting to see how much my card was charged, it's difficult to get info on previous purchases and it's often down.

Amazon will continue to dominate as long as the competition has this far to go to catch up, overall.

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Emupaul
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I have Prime. Free/fast shipping is nice. I do shop around for the best total price.

One thing that helps with Amazon's BS of changing prices is deleting browser cookies. And don't shop while logged in.

I had DirecTv but when it went to $142/month ($1700 a year) and their best offer was to drop the bill to $80 plus tax, well, Bye! After 18 years...

I bought a Roku Premier and an antenna for over the air for a total of $120. From Wal-Mart of course... Ship-to-store is handy IF they don't lose your stuff.

Local channels over the air are in HD. Huh, I was paying DirecTv for HD... Sub-channels are interesting. And when it rains I still have TV.

The Roku is fun. LOTS of free stuff. Sure, you get commercials, big deal, time to get another beer and get rid of the last beer.

We watch a movie on Prime almost every evening. Call it 4 times a week, times 52 for 208 movies. For the price of Prime at $98/year. Beats the hell outta Redbox and driving into town to get and return discs.... which has never happened.


Goforbroke
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Quote:
Amazon will continue to dominate as long as the competition has this far to go to catch up, overall.
I, too, live in a rural area (not quite as remote as yours, though). And, yes, Amazon prime has been very advantageous.

However, you and I are in the minority ... they put up with us in order to take advantage of the higher-density areas and make the same revenue with far less cost.

Ultimately, all of these companies are chasing after those customers in high density/volume areas of the country. Customers in those areas are subsidizing what we get from them. Gotta admit, fine by me.

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Our deepest fear is not that we are inadequate. Our deepest fear is that we are powerful beyond measure. It is our Light, and not our Darkness, that most frightens us. -- Marianne Williamson
Tickerguy
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Ultimately, all of these companies are chasing after those customers in high density/volume areas of the country. Customers in those areas are subsidizing what we get from them. Gotta admit, fine by me.

Which only works until they leave.

And they are. I'm one of them.

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