Current affairs

Walmart’s alliance with Google

Amazon’s foray into the food market is a threat to grocery retail chains

Thursday, 7 de September, 2017

By Maria Ángeles Ruiz Ezpeleta, a lecturer on Global Management on the Full Time and Executive Master in Supply Chain Management at EAE Business School in Barcelona

The US retail giant Walmart has announced an alliance with Google to challenge Amazon’s leadership in e-commerce.

The announcement is an attempt to combat the direct attack that Amazon has launched against all grocery retail chains by adding food products to its catalogue, enabling customers to by the goods online and have them delivered in 24 to 48 hours anywhere in the United States.

Started off in 1994 selling books online, Amazon went on to expand its catalogue, initially with software and electronic devices, eventually offering a huge range of items, including food products.

Since the emergence of Amazon, sales in bookshops have fallen drastically. The sale of electronic goods has also dropped in chains of physical stores. It is indisputable that Amazon’s launch into the market has had an impact on many physical store chains in a broad range of sectors.

Amazon’s foray into foodstuffs in a threat to the grocery chains specializing in such goods, the largest of which in the United States is, without question, Walmart.

Walmart has forged this alliance with Google based on the philosophy of “attack is the best form of defence”.

However, if we analyse this alliance closely, as in the case of Amazon’s acquisition of the Whole Foods supermarket chain, it becomes clear that both giants are trying to make inroads in terrain in which they are not specialized. Walmart is striving to challenge Amazon in e-commerce and Amazon is attempting to compete in the sale of food products with Walmart, the undisputed leading grocery chain in the United States.

They are both investing in business models in which they are not specialists and, moreover, neither of them are offering consumers any innovative services that go beyond those already available on the market.

With its alliance with Google, Walmart offers similar services to Amazon in terms of voice ordering system, delivery times, etc. Meanwhile, through its purchase of Whole Foods, Amazon is not really offering anything innovative either with respect to the services that Walmart offers in relation to grocery sales in its stores.

Both companies should heed Steve Jobs’s words when he said “innovation sets the leaders apart from the followers”. If Walmart and Amazon do not offer anything innovative, they will simply be each other’s followers and, logically, each of them will win in their speciality and field: Amazon in e-commerce and Walmart in grocery sales in its stores.

In my opinion, Walmart should invest its efforts in innovating with respect to its current services, both in its physical stores and its online sales. If it fails to offer innovative services in the field of e-commerce, it is destined to remain simply another follower of Amazon.

 

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