Bruce Merrifield 2017-09-06 05:26:06
Amazon vs. Walmart The rollout of supercenters at Walmart stores across the U.S. was ending in 2000 as Amazon simultaneously was starting to nibble on Walmart’s consumer whole-goods sales. Walmart’s subsequent 17-year response has been a slow, poor, expensive imitation. Walmart can’t catch up, but they do show signs of shifting its online capabilities to possibly digitally improving its core customers’ in-store shopping experience. A Walmart supercenter stocks roughly 100,000 of the most popular consumer items. The top 7,000 SKUs by sales account for 70% of all sales. These SKUs all pass through Walmart’s cross-docking centers. The daily delivery of these items to stores enables 99% fill rates with no excess inventory at everyday low prices. Customers go to Walmart to load up on these consumables and buy other things they need. The bottom 80% of U.S. households, by income, can’t afford not to shop at Walmart. These items and these customers are Walmart’s profit core (times 4,200 stores in the U.S.). Walmart has invested well over $10 billion in electronic commerce fulfillment warehouses and other avenues, only to come up short against Amazon. However, Walmart now is experimenting with how these capabilities can be used to serve its profit core. We can call this alternative path digital kaizen or continuous digital improvement. As part of this improvement, Walmart has created the “Easy Re-Order” online form, which shows all previous purchases. Consumers click to order and then pick up from an orange pickup tower code-named Rapunzel. For the future, assuming 5G phone service and digital shopping by all by 2019, other avenues may include: • A store app that texts shopping possibilities to customers as they walk through the store. • In-store signage (and guides) for upsells, cross-sells and savings-sells on the 40 million additional SKUs in the eCommerce fulfillment centers. • Marrying these two to an online comparison tool for both price and delivery where deals may vary with the consumer’s loyalty purchasing record. LESSONS FOR YOUR FIRM What can you learn from Walmart’s 17-year battle with Amazon? Be true to your infrastructure and your most historically profitable customers. Don’t try to sell online to the world because Amazon’s infrastructure wins. Ask your most profitable customers in your most profitable niches how you can digitally enhance their total buying needs and then do it. Lastly, measure and fix the profit cross-subsidies among your customers and SKUs before Amazon steals your best customers and your best SKUs. To do this, you should master cloud service line-item profit analytics. Email me for more information. Meanwhile, think about these questions for your own business. 1) What does “be true to your infrastructure” mean? If you have a distribution center in a part of town with little drive-by traffic, then it isn’t a Fastenal or Grainger “wholetail” location on a four-lane commercial highway or retail space at the mall. What can your center do and not do vs. Amazon’s? Ditto with your website vs. Amazon’s? And, do you want to keep any outside sales reps? Then, what are the best customers, best products and new ways to sell that only you can do best? 2) Can you create “easy-order forms” under a customer’s login on your website that allows customers to most easily eyeball their onsite replenishment needs and reorder? Vending machines connected to the internet can even automate the easy-order entry. Ask Bruce: Longtime industry consultant Bruce Merrifield is an expert on highperformance service management and is one of the most successful turnaround advisors for wholesale-distribution companies and channels. Each month Bruce will answer your distribution-related business questions here. Have a question for Bruce, email Chief Editor Mike Miazga at firstname.lastname@example.org.
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