When Amazon and Walmart Go to War

In 2018, it’s the year of the clash of U.S giant retailers: Walmart, the world’s largest
retailer, versus Amazon, the online giant that aspires to be “the everything store. The world's
biggest brick-and-mortar retailer just escalated its price war with the world's biggest e-
commerce retailer. Walmart deserves credit for penetrating an e-commerce market that's was
controlled by Amazon.com. Walmart is subsidizing price cuts, it requested of some third-party
sellers offering their goods at Walmart.com. The move, according to experts, appears to be a
response to a similar price-lowering strategy applied by Amazon.com in August of the same
year.” Walmart executives have decided in early 2017 to take a chunk of the online retail
business and spend billions of dollars enhancing its site and make it attractive and easy to use
for consumers to shop. Both are slashing prices and increasing free, same-day and other
enticing delivery-and-return services in pursuit of market domination. Amazon’s online patience
of profit-taking is well known. Both companies are fighting to capture the e-consumer. Amazon
CEO Jeff Bezos has disclosed that its Prime membership program that has been introduced in
2018 has more than 50 million members in the USA and more people are signing to get this
loyalty card, while Walmart doesn’t have a loyalty rewards program in the traditional sense, it
does offer free shipping without incurring additional cost. Walmart is finally getting serious about
e-commerce. Walmart is now bulking up it's own online ads business whereby the retailer
previously used space on its site mostly for its promotions; it's now increasingly selling it to other
brands and suppliers simply because of the high traffic of customers that currently visiting its
site.  On the other hand, Amazon has built its advertising operations into a billion-dollar
business, and it's expected to grow to more than twice that by 2019. Advertisers are interested
in what Amazon has to offer because consumers are increasingly starting their search for
products online rather than being inside the stores. Mobile marketing is being used by both
retailers because almost every consumer possesses a mobile and advertisers can communicate
their latest offers.  Moreover, both retailers agree that the internet helps to extend the product
life cycle curve, simply because every product is still available online.  Both retailers are now
cutting into their profit margins in a race for market share; the trend of the retail future is going
into the online business.  Amazon with its amazing knowledge of the online business is
expanding into new categories. According to experts, “Amazon and Walmart are going to take
over the market for people who want stuff cheap and fast”.  And what Walmart and Amazon do
has a way of trickling down: “There is pressure on all retailers to increase speed and lower the
cost.”  The Walmart-Amazon clash, many observers say, is part of a much larger battle
compelling retailers to spend billions of dollars in new warehouses to facilitate quick delivery as
the shift toward online shopping accelerates. Meanwhile, Walmart has been charging deeper
into online retail. Since 2017, Walmart’s online sales are up 78% and are now growing twice as
fast as Amazon’s, according to Forbes the most reputable Business magazine. Walmart plans
to deliver online orders from 1,600 stores by year’s end, while Amazon operates over 175
fulfillment centers around the world. Rather than luring the customer to the merchandise, the
merchandise is going to the customer, and the industry is transforming itself.   Still, Walmart’s
online shopping sales are growing fast, and Walmart executives believe with more
communications in mobile marketing they should be able to win the retail battle and force
Amazon to second place.
 
Amazon versus Walmart, the battle of the giants, may often leave smaller retailers feeling like
they're scrambling for crumbs from this two powerful retail. Who will win is up for grabs.
 

Questions:

1. When the physical product cannot easily be differentiated, the key to competitive
success may lie in adding valued services and improving their quality. As the war
between Walmart and Amazon continues when it comes to online marketing, explain
how either company can achieve competitive advantages when it comes to service
differentiation.

2. As a marketing consultant to Walmart do you advise the company to use any other
forms of communication along with online?  Justify your answer by explaining all the
communication mix and state which tool applies to the case.

3. The product hierarchy stretches from basic needs to particular items that satisfy those
needs. Identify the six levels of the product hierarchy for Walmart, use the internet to
support your answer.

4. Apply the macro-model with the nine key factors in effective communication for
   
Walmart.  Support your answer with an example that Walmart can benefit from it.