It’s the battle where the only casualties will be a few upper management jobs and a slight drop in share prices. It’s Amazon against Walmart for retail supremacy, and the ultimate winner is the average shopper. The companies have been feuding for years, but how might that affect American consumers?
We’ll give you some background on the Amazon against Walmart battle, then tell you how it will affect you (pages 6 and 7), and why Amazon will be fine either way (page 10).
There are really two kinds of people in America
- Are you Team Amazon or Team Walmart?
Coke or Pepsi? Burger King or McDonald’s? Paper, plastic, or reusable? A lot of consumer decisions come down to two or three choices. There are basically only two types of people in the world when it comes to retailers that stock everything: Amazon and Walmart. Chances are you have one you prefer.
Next: The Indian version of Amazon is off the market.
The latest development
- Walmart spends $16 billion for an Indian company
Amazon is the world’s leading online retailer, and Walmart wants a piece of the action. It ponied up $16 billion to buy 77% of Indian online retailer Flipkart in May of 2018, which includes an immediate $2 billion investment, according to CNN Money.
It’s a lot of money, but Walmart gets immediate access to an established company thriving in one of the biggest markets on Earth. Flipkart is basically India’s Amazon, and now Walmart owns most of it.
Next: Where have we heard this before?
Walmart has done this before
- The company made another big acquisition in 2016.
Buying Flipkart wasn’t the first time Walmart spent billions for a bigger stake in online retail. It paid $3.3 billion for Jet.com in August 2016. That was just another bombshell in the head-to-head Amazon against Walmart fight.
Next: A third major corporation joins the fight, and it’s not Target.
Google is a part of all of this
- Walmart partners with the tech giant to fill orders.
Walmart and Google joined forces in September 2017. Walmart added its entire inventory to the Google Express marketplace, which allows Google Home users to voice-order products from Walmart, according to Forbes.
Costco, Kohl’s, Target, and Walgreens sell merchandise through Google Express, but they don’t have the kind of selection Walmart has. Between acquiring Jet.com and partnering with Google, it’s not surprising Walmart’s online revenue increased 50% at the end of 2017, according to Fortune.
Next: Why Amazon isn’t scared of Walmart’s latest move.
Amazon has a major presence in India
- Jeff Bezos doesn’t have to worry about his fortune.
Amazon offered to buy 60% of Flipkart just days before the Walmart deal closed, according to Reuters. It’s an indication Amazon is alarmed by the development, but it’s not scared. Here’s why:
- Amazon and Flipkart have nearly identical market shares in India, according to the Economic Times. Flipkart has about 32% or the market and Amazon a little more than 31%.
- More Indian shoppers do web searches for Amazon than for Flipkart, according to Quartz.
- A consumer poll finds that Indian shoppers prefer Amazon to Flipkart.
The TL;DR take is Amazon is still a giant in India and CEO Jeff Bezos doesn’t have to worry about slipping off the rich Americans list.
Next: What it all means for consumers.
Amazon’s prices will go lower
- We’ve seen it happen before not too long ago.
Amazon already operates on thin profit margins, but you should expect to see lower prices all around, especially on products that Walmart also sells. We’ve seen it happen before. Amazon purchased Whole Foods for $13.7 billion in an effort to eat into Walmart’s grocery business. It immediately cut Whole Foods prices so it could stay competitive.
Next: You know Walmart won’t sit still.
Walmart will do what it always does
- Offering the everyday low price is key Walmart strategy.
Offering the best prices day in and day out is a cornerstone of Walmart’s philosophy, but don’t take our word for it. The company says so on its website. The company already has better prices than Amazon on some common items, and shoppers can expect more low prices in the future as the Amazon against Walmart battle intensifies.
Next: Big changes in the way we shop for the things we all need.
Walmart wants to change how you shop for groceries
- Voice ordering and online shopping change the game.
Remember how we discussed Walmart making all its inventory available on Google Express? Well, that includes groceries. Whether its voice-ordering, shopping online and picking up in the store, or cruising the aisles in person, Walmart lets you shop for groceries whichever way suits you.
The company expanding its grocery business makes things tougher for your standard supermarket. Grocery stores won’t go down without a fight, though. They do everything they can to cater to their customers, which is why so many supermarkets are among America’s most-loved retailers.
Next: Amazon and Walmart are meeting in the middle.
Each company is expanding into the other’s territory
- Amazon adds physical spaces, Walmart expands its online presence.
With its Whole Foods purchase, Amazon Go stores, and a handful of other projects, Amazon is adding a physical presence to its established digital domain. As we’ve discussed, Walmart is expanding its online presence to complement its thousands of stores. Or as Investor’s Business Daily puts it, the line between traditional and online retailers is basically gone.
The two companies are so similar that it’s not even Amazon against Walmart anymore. It’s more like two identical twins duking it out.
Next: The one thing Amazon has that Walmart doesn’t.
Amazon will be just fine either way
- It has one thing Walmart can’t offer.
The worst-case scenario for Amazon is that Walmart and Flipkart make it a non-entity in India. Being booted from that big market wouldn’t be great, but it represents just a fraction of the $54.2 billion of international business it did in 2017.
Plus, there’s always Amazon Web Services, the secret moneymaker in Amazon’s back pocket. The $17.4 billion sales AWS did in 2017 is roughly a 150% increase from 2015 and it’s one part of Amazon’s business that Walmart can’t compete with.
Check out The Cheat Sheet on Facebook!