Target and Walmart Score Some Points Against Amazon

Anyone who follows the retail industry is aware of the relentless ascent of Amazon, a tech giant that has completely transformed the way that millions of people worldwide purchase products. Perhaps Amazon’s most famous innovation is Amazon Prime, a subscription service that includes free two-day delivery on millions of items for sale on their online marketplace for $119 per year (or $12.99 per month).

However, some retailers are beginning to push back. Specifically, I am speaking of Target and Walmart. Although they are older players on the retail scene, both Target and Walmart have made significant moves recently to counter the advance of Amazon. In recent years, they have both invested heavily in new capabilities to achieve better integration of their in-store and online shopping experiences, and those investments are finally starting to yield fruit.

Old dogs with new tricks

In 2017, Target acquired Shipt, a delivery service that offers consumers same-day delivery for products from multiple retailers. (Shipt is wholly owned by Target, but it continues to run its business independently.) An annual Shipt plan is $99 for unlimited orders of $35 or above, or customers can pay per order with same-day delivery. By utilizing a combination of its physical locations, Shipt, and curbside pickup, Target has been able to push back against some of Amazon’s competitive advantage.

In a similar vein, Walmart announced a major expansion of its Delivery Unlimited grocery delivery membership program earlier this month. Initially only available in four markets, the company plans to roll out the program to more than 1,600 stores by the end of the year, effectively reaching more than 50% of the country. The service allows customers to pay $98 per year (or $12.95 per month) for unlimited Walmart Grocery Delivery orders. Customers can also choose to pay a per-delivery fee without a membership. (To all Amazon Prime members, do Target’s and Walmart’s pricing structures sound a little familiar?)

So, Target and Walmart are both competing with Amazon by offering the convenience of same-day delivery. And they are also both attempting to be comparable to Amazon’s prices on many products (and their membership fees). Furthermore, they are successfully leveraging their large networks of physical store locations to offer things that Amazon cannot. After all, shoppers cannot physically interact with their products before purchasing through Amazon. Likewise, unless they are members of a few select markets nationwide, shoppers cannot head down to the Amazon store to pick up items immediately if waiting for delivery is not an option.

Additionally, the brick-and-mortar store networks of Target and Walmart may help them to realize lower fulfillment costs as they compete with Amazon’s push to make free one-day Prime shipping the new standard. Forbes cites figures from Gordon Haskett analyst Chuck Grom that show that Target’s same-day fulfillment costs almost 90% less than using a distribution center, and shipping online orders from stores costs about 50% less than using a distribution center.

Furthermore, Target and Walmart (as well as hundreds of other retailers) also directly countered Amazon’s promotion strategy this year by offering sales at the same time that Amazon held its annual Prime Day sales event on July 15^th and 16^th. Initial reports indicate that the efforts were successful for both Target and Walmart.

It isn’t over yet

But Target and Walmart know that they can’t count their chickens just yet.

The Wall Street Journal reported in March that Amazon has plans to open dozens of grocery stores across the country. These stores would be in addition to its existing Whole Foods Market stores, which Amazon acquired in 2017. The first stores will open in Los Angeles, possibly before the end of 2019, with additional stores planned for Chicago, Philadelphia, San Francisco, Seattle, and Washington D.C. Additionally, Amazon is also toying with the idea of acquiring regional grocers.

So how is Amazon trying to stay competitive? Simply, Amazon is trying to establish a physical proximity to more of its customers. This change in approach undermines the narrative that Amazon will be the death knell of all brick-and-mortar retailers. Of course, it is important to note here that stores do need more than a physical presence alone to compete with Amazon. Look no further than Macy’s and JCPenney to find brick-and-mortar retailers who were incredibly successful last century but that have struggled to keep up with changing markets and consumer preferences this century. Amazon has a strong technology infrastructure that many competitors will have difficulty replicating, including amazing logistics and world-class data analytics.

In fact, it appears that Amazon is recognizing the need to become more like its traditional retail competitors in the same way that Target and Walmart recognized the need to invest in Amazon-like fulfillment technology. It is quite likely that this game of retail one-upsmanship will continue for the foreseeable future.

Naturally, I can’t predict where any of this will eventually lead or which retailers will come out on top. After all, greater minds than mine have noted that prediction is difficult—particularly when it involves the future. But I can say that all this competition is bound to give consumers more options, and the 2019 holiday shopping season could be a wild ride for all parties involved.

References:

Cheng, Andria. “Target, Walmart Results Show They Do Have an Edge Against Amazon.” Forbes. Forbes Magazine, August 22, 2019. Accessed September 12, 2019.

Day, Matt. “Report: Amazon to Open Grocery Stores in Many U.S. Cities.” Time. Time. Accessed September 13, 2019. Accessed September 12, 2019.

Mourdoukoutas, Panos. “Target Joins Walmart in Pushing Back Against Amazon, Changing Retailing.” Forbes. Forbes Magazine, August 24, 2019. Accessed September 12, 2019.

Spector, Nicole. “Move over Amazon, ‘Black Friday in July’ Sales Are Heating Up.” NBCNews.com. NBCUniversal News Group, September 4, 2019. Accessed September 12, 2019.

“Walmart to Roll Out Delivery Unlimited to More than 1,400 Stores Across the Country.” Walmart Corporate Website. Accessed September 12, 2019.