Last week, three-time world champion Australian boxer Danny Green destroyed icon Roy Jones Jr. in just one round to take the IBO cruiserweight title. Meanwhile, in the US, a fascinating fight of a different kind is taking place between the undisputed discount department store champion Walmart, and the upstart web powerhouse Amazon. The tussle is ostensibly about the critical retail real estate of the future: online.
Round One was held in October when Walmart took it up to Amazon on its traditional territory of new release books, sparking a price fight that saw hardcovers drop below US$9 each. Round Two saw the skirmish cross over into DVD’s and games, with Walmart offering a US$15 gift card with a new video game, and Amazon price matching soon after. Round Three has moved into electronics, with both players offering the Xbox 360 gaming console for US$199, with a US$100 gift card thrown in, and a new release Palm mobile phone for US$30, about US$175 off the recommended retail price!
On the surface of it, you’d have to ask: why would Walmart bother? The discount department store is the world’s biggest company by turnover, a US$405 billion goliath, while Amazon is a relative lightweight at just US$20 billion in annual sales. But Amazon poses a long-term channel threat. During what some American pundits are now calling the “Great Recession”, regular retail sales slid, while Amazon continued to post healthy double digit increases. Walmart is not going to give the online game away to Amazon. Over the years, it has methodically picked off category after category, brushing aside competitors. Now Walmart is using the same strategy with online.
“Our company is based on low prices,” Raul Vazquez, President and CEO of Walmart.com was quoted as saying in the New York Times last month. “Even in books, we kept going until we were the low-price leader. And we will do that in every category if we need to.”
The scuffle actually goes further than the web alone. Amazon has also been making forays into mobile commerce with smart phone shopping applications and buying at home via intelligent TV remotes. Amazon and Walmart both realise that the next decade will belong to the “Constantly Connected” consumer, able to compare product and prices and buy what they want, wherever and whenever they want, increasingly from their mobiles. So it’s imperative to be pre-eminent in both e and m-commerce.
What does it mean for Australian retailers? First and foremost, it might be worth estimating how much in sales Amazon is stealing from you currently. Particularly with the high Australian dollar, a huge amount of business is drifting to overseas online retailers, with Amazon getting more than its fair share. BRW last week reported that online payment group PayPal had seen a “noticeable increase” in the number of overseas purchases made by Australian users since the Aussie dollar started to rise. So consider Amazon a competitor and make sure you are competitive...on delivery and range of product as much as price. Secondly, if you’re going to survive and thrive in the next decade of retail, you must have a plan to appeal to the “Connected Consumer”.
In the meantime, it will be interesting to see how the battle of the heavyweights plays out in the US. Whoever hits the canvas, the consumer will be the ultimate winner.
Jon Bird is CEO of retail marketing specialist IdeaWorks (
www.ideaworks.com.au). Email jon.bird@ideaworks.com.au.