Amazon and Walmart Pursue New Front in Retail Rivalry: Cryptocurrency

nathanlphipps

Nathan L. Phipps
Consultant, Wiglaf Pricing

Published August 17, 2021

The rivalry between Amazon and Walmart (which has been covered in this journal previously) is about to open a new front. The Wall Street Journal reported that Walmart is looking for a cryptocurrency expert to work at their headquarters in Bentonville, Arkansas. The position is listed as a digital-currency and cryptocurrency product lead who will “commit to a product roadmap and drive the project execution” and “identify customer needs and translate them into product requirements” while working with product and design teams.

Last month, Amazon posted a similar position for a digital currency and blockchain product lead. In a statement, an Amazon spokesperson said, “We’re inspired by the innovation happening in the cryptocurrency space and are exploring what this could look like on Amazon. We believe the future will be built on new technologies that enable modern, fast, and inexpensive payments, and hope to bring that future to Amazon customers as soon as possible.”

The rivalry between Amazon and Walmart is about to open a new front: cryptocurrency

Photo by Executium on Unsplash

Retail Cryptocurrency Payments

Amazon and Walmart do not currently accept any form of cryptocurrency for payment. Some U.S. retailers have started to accept cryptocurrency indirectly. For example, Home Depot and Starbucks both accept cryptocurrency indirectly using third-party applications that handle the conversion from digital currency into dollars.

What innovation can we expect from these two massive companies dipping their toes into the cryptocurrency pool? At the very least, one would expect them to make it easier to use cryptocurrency. From a longer and more strategic perspective, it makes sense for these two titans of retail to expand their capabilities for a potentially impactful technology: they do not want to get outmaneuvered by their rivals and get left behind.

Cryptocurrency and blockchain technology could offer a competitive advantage to those firms who are willing to invest in it. And both Amazon and Walmart are trying to uncover and utilize every competitive advantage that they can find.

Time waits for no retailer

This longstanding retail rivalry is likely to heat up even more. Consensus estimates from FactSet show that Wall Street expects Amazon to overtake Walmart as the world’s largest U.S. company by sales sometime in 2022. This is a fairly surprising development, considering that five years ago, Amazon was barely a quarter the size of Walmart. In just three years, Amazon’s operating profits have increased more than fivefold. (Although it should be noted that a major cause of that profit increase is the profitability from its Amazon Web Services (AWS) cloud business, which made up nearly 60% of Amazon’s total operating profits last year.)

Due to their inherent differences, Walmart will not be able to match Amazon play-for-play. Amazon started as an e-commerce pioneer that discovered a goldmine in its AWS cloud business. Walmart started as a brick-and-mortar retailer and has recognized that competition and changing consumer behavior require it to digitize or die.

But just because Walmart did not start as a tech company does not mean that it cannot use more technology to meet its growth targets. A major push of CEO Doug McMillon in his 7 years at the helm has been an embrace of e-commerce and a willingness to invest in technology to execute a digital vision for the company. Successfully executing a radical change in company vision and culture requires patience and perseverance. Having buy-in from the top will always increase your chances of success.

In retail, don’t forget about the tech

Walmart will have to keep up on its technology game, especially since Amazon is a dyed-in-the-wool tech company. And it is obvious that Amazon wants to continue developing and elevating its tech talent. When Jeff Bezos stepped down as CEO, he handed the reins to Andy Jassy, who created and built AWS into a major player in the cloud-computing industry. And Andy Jassy’s spot at AWS was filled by Adam Selipsky. Mr. Selipsky previously worked as one of the first vice presidents for AWS before leaving in 2016 to become CEO of Tableau Software.

But Walmart is not asleep at the wheel. The COVID-19 pandemic caused Walmart to accelerate some of its moves to digitize its business. That included additional investments in e-commerce and launching a new Walmart+ membership service to compete with Amazon’s Prime membership service. Walmart appears to be very cognizant of what its major rival is up to.

Now, it is possible that all the attention being paid towards these new cryptocurrency positions at Amazon and Walmart may not amount to much of anything. It could be a case of two giant American companies jumping on the cryptocurrency bandwagon and diverting their attention from more productive and profitable endeavors.

However, in a competitive market, firms may find themselves in a Red Queen’s race, where they must run as fast as they can just to keep in the same market position. Both firms know that they do not want their competitor to get a leg up on them. So, both firms will invest a modest amount in the hopes of outwitting and outplaying their competitor with a new competitive advantage (or at least defanging or matching their competitor’s competitive advantage). Only time will tell us if their cryptocurrency investments were astute or a distraction.


References

Abdel-Baqui, Omar. “Walmart Looks to Hire Cryptocurrency Expert.” The Wall Street Journal. Dow Jones & Company, August 16, 2021. https://www.wsj.com/articles/walmart-looks-to-hire-cryptocurrency-expert-11629128826.

Gallagher, Dan. “Amazon’s Jeff Bezos Is Handing Andy Jassy a Unique Set of Challenges.” The Wall Street Journal. Dow Jones & Company, July 2, 2021. https://www.wsj.com/articles/amazons-jeff-bezos-is-handing-andy-jassy-a-unique-set-of-challenges-11625233065.

Palmer, Annie. “Amazon Is Hiring a Digital Currency and Blockchain Expert, Signaling a Growing Interest in Cryptocurrency.” CNBC. CNBC, July 23, 2021. https://www.cnbc.com/2021/07/23/amazon-is-hiring-a-digital-currency-and-blockchain-expert.html.

Ziobro, Paul. “Amazon Taps Tableau CEO Adam Selipsky to Lead Its AWS Cloud Unit.” The Wall Street Journal. Dow Jones & Company, March 23, 2021. https://www.wsj.com/articles/amazon-taps-tableau-ceo-adam-selipsky-to-lead-its-aws-cloud-unit-11616534005.

About The Author

nathanlphipps
Nathan L. Phipps is a Consultant at Wiglaf Pricing. His areas of focus include pricing transformations, marketing analysis, conjoint analysis, and commercial policy. Before joining Wiglaf Pricing, Nathan worked as a pricing analyst at Intermatic Inc. (a manufacturer of energy control products) where he dealt with market pricing and the creation of price variance and minimum advertised price policies. His prior experience includes time in aerosol valve manufacturing and online education. Nathan holds an MBA with distinction in Marketing Strategy and Planning & Entrepreneurship from the Kellstadt Graduate School of Business at DePaul University and a BA in Biology & Philosophy from Greenville College. He is based in Chicago, Illinois.