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Why Walmart Will Still Lose to Amazon

Walmart’s decision to offer free two-day shipping for orders over $35—without any membership fee—is a direct shot at Amazon, and has been heralded as a bold move to protect its embattled retail turf. Business Insider proclaimed that Walmart has “undercut Amazon’s most valuable perk,” and that the move “should terrify Amazon.”

Not so fast.

It’s Walmart who is terrified. The move sends a resounding message that Amazon has the 50-year-old retail giant on its heels. Lost and panicking, Walmart has chosen to engage in a battle on someone else’s terms. And it’s a battle it can’t win.

You don’t gain ground with a defensive strategy. Amazon has perhaps the best offense game in retail history, and Walmart’s copycat approach comes twelve years after Prime’s launch. Make no mistake: Walmart is in a fight for its survival. The chain needs a bold approach. But trying to duplicate one attribute of a revolutionary product isn’t a strategy. It’s desperation.

Walmart would probably like to forget the episode in 2005 when it took out full-page ads in Vogue, seeking to penetrate the high fashion market. In hindsight, the strategy seems bizarre, and a few years from now commentators will look back and recognize the decision to go head-to-head with Amazon Prime as equally misguided.

The Vogue catastrophe illustrates Walmart’s secret sauce. The brand has been successful when it has maintained laser focus on a single target: those who live paycheck-to-paycheck. Walmart provides a low-cost, no-frills shopping experience for those people. It’s very, very good at that. The Walmart shopper is low-maintenance, self-identifies as thrifty, and doesn’t mind dealing with an unsavory shopping experience if it gets him a better deal. The times when the company has deviated from that target have been its times of greatest turmoil.

Amazon’s target is a little different. Price is important to her, but she’s not shopping on price alone; she will spend time reading reviews and researching options. She likes comparing multiple name-brand products to select the best fit, rather than being stuck with the lowest common denominator. Experience is important to her: not the traditional retail experience, but ordering with a single swipe, wherever and whenever she wants, is an outstanding experience. Even online, Walmart just can’t match that. Walmart saves money, but Amazon saves money, time, and trouble.

And while Walmart shoppers take pride in sacrificing a little cultural cachet for greater value, Amazon shoppers get the social prestige thrown in. Walmart’s failure to understand this shows just how lost it is in Amazon’s wilderness. For Amazon’s target, a Prime membership is not, as price-obsessed Walmart has assumed, a down payment on shipping costs. An Amazon Prime membership is a status symbol. It’s a statement that I get it, that I’m smart enough to recognize a new approach that will improve my life. A Prime member is in the loop—whether on the latest Amazon Original pop-culture references, or in knowing with every order that she made a shrewd investment and gets to see it pay off. Meanwhile, Walmart is deeply entrenched as the thrifty, but less desirable option (an identity brutally conveyed by the blog and trope of “People of Walmart”).

Walmart just can’t win this fight. While Walmart has spent 50 years investing in brick and mortar, Amazon has spent its entire existence perfecting a delivery model without any of the overhead that weighs Walmart down. Walmart has already demonstrated its inability to navigate the retail landscape that Amazon has mastered. Moving deeper into Amazon’s turf only means Walmart will compete where it has no competitive advantage.

And let’s not forget, Amazon has offered free shipping to non-members for years. Even without Prime, Amazon provides free shipping on orders over $49 – hardly a difference from Walmart’s new $35 minimum. Walmart brags about not charging a membership fee, but it’s delusional if it thinks Amazon customers will come running back to save a few bucks on a $40 order.

I’ve made three purchases on my own Amazon Prime account this week. They were all under $35, and they were all for brands or products that you can’t get at Walmart. It didn’t cross my mind to shop for them at Walmart. The reason, to which Walmart seems oblivious, is that Amazon has spent the last twelve years building Prime as a retail brand, not a free-shipping feature. I’ve learned how to use the app, I’ve paid my dues, and I’ve bought in. Every time I see the Prime logo, every time I cringe at the thought of parking, dealing with ill-trained sales staff, and standing in line, I pat myself on the back for finding the better way as a Prime member. Walmart has spent that same period differentiating on price alone, so it comes naturally to them now to assume that another discount will get the job done.

But it won’t, because Amazon’s advantage isn’t free shipping. Amazon’s advantage is the place it has won in customer’s hearts and minds as the convenient, smart retail option. And that’s not something you can buy with a $6.95 shipping fee.

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Written by

Eric Layer

Not many people can say their parents fell in love at a mortuary.


Published on April 5th, 2017

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