Conflict at Walmart threatens its ecommerce battle with Amazon
vox.com
vox.com
This article feels like an article designed to pressure Marc Lore to leave.
Losing $1B on $22B in revenue, after just 3 years of really starting this bet is nothing!
They may have been unattractive by wall street's standards (eg. Pay outs) but they were far from unprofitable.
Amazon lost about $2 billion in their first six years of operations.
And Walmart's online presence would be profitable now if they weren't investing heavily in infrastructure (20 fulfillment centers trying to catch up to Amazon's 110) and new services (online catalog to match Amazon's).
1996: -$6.4m on $15.7m sales || 1997: -$32m on $147m sales || 1998: -$109m on $609m sales || 1999: -$605m on $1.63b sales || 2000: -$863m on $2.76b sales || 2001: -$412m on $3.12b sales
In 2002, as a forced result of the dotcom crash and stock market plunge (their ability to continue to fund such red ink was in question), they had to expedite getting to operating break-even and turned off the spending spree they were using to get big artificially fast. They turned a $64m operating profit in 2002 on $3.9b in sales. Positive operating income climbed to $440m by 2004.
Their products aren't even that good, surely more of them aren't going to hold up to online competition either.
I also never got the feeling that walmart shoppers are "i need same day delivery" types. they're in it for the bargains. You tell them an option is going to be slightly cheaper, they'll go for it.
I feel like they should keep the focus on their brick and mortar stores and forget about trying to compete with amazon.
Buying something from Wal-Mart is far from a seal of quality.
Yay, WalMart! (And Best Buy, for that matter- their online pick-it-up-in-five-minutes option is amazing.)
Their deliveries are on point, the self checkout works perfectly, they're even a store pick up service where you just pull up to designated parking stops and the attendants load up your trunk with order which is ready by time you arrive at the shop.
It's a lot harder to get your product on a Walmart shelf than having it listed on Amazon. There's an existential quality assurance when you buy from Walmart than Amazon.
Makes me think Marc Lore has run afoul of and/or transgressed some ideological prime directive and this is a hit job.
Lore is operating like a startup, not focused on short-term profits.
Meanwhile, Walmart's US CEO, Greg Foran has his compensation tied to annual results, which include Lore's operations.
If accurate, this reads like Incentives 101, and it reflects poorly on Doug McMillon, Walmart's overall CEO.
That said, credit to them for identifying an area of strength (grocery delivery) and leaning into it hard.
[1]: Amazon was founded in 1994, Jet.com founded in 2014.
EDIT: Also wow, this article needs an editor. Is the CEO's last name McMillon (5) or McMillion (2)?
There's no way for us to know who is right based on reading one article.
Yeah, unfortunately this is very common. There are good reasons for this. If you're a public company, your financial health is being constantly scrutinized by wall street which will punish your stock price (and thus, executive compensation as well). Which incentivizes short term planning, and long term investments need to pay some sort of dividend, or else it will become a closely scrutinized and wildly unpopular.
I am unsure how they reach this "achievement." I didn't think any close to modern website could act like ESPN in loading 32453235 scripts per page...
And please... Fix it so I can search for in-store only items.
Amazon.com (logged in) was 12MB, with 28 scripts.
(Disclaimer: Anecdata for my system, obviously.)
There are substitutes for AWS, but the switching cost is relatively high. Whereas for toothpaste, breakfast cereal, toasters, books etc etc the substitution is perfect (I can buy the same brands from many companies) and switching cost is low (I pull out a credit card).
Insofar as Amazon has a large free cashflow coming off AWS after capital improvements, it can use that money to (a) attract cheap funding from Wall St to (b) build, build, build.
I will say, Amazon's above the fold paint was faster, but it did load a LOT after that.
Their landing page doesn't have a filtering option, but the bar at the top of the search results page has a "Store Availability" option.
Loads fast, looks clean, seems to work fine.
The main problem is most of the images are extra large and poorly optimized (they are all preloaded it seems, as Next.js does automatically). Even on my fast fiber connection it flashes.
For example, this product image is 63kb:
https://jetimages.jetcdn.net/md5/f442c4124ca2fb7537503a592a7...
But on the page it’s only loaded 360x360 px but are downloaded at 700px.
Amazon's above the fold render does appear a little faster, but their total payload and load time is much larger/slower.
Their stores are also pretty shabby. They entered Brazil buying Bompreco (which was not well run at all) and then they bought the Portuguese Sonae (which was reasonably efficient) and proceeded to weed out the good parts in order to homogenise the whole operation at the lowest possible quality.
Sonae had a really good POS on which you could even sell advertising space. It was replaced by a POS that looks like a 40 column DOS application.
I have to say, I know of no large store with any passable POS on Brazil. They are all horrible.
It seems that WM just goes into markets with not enough planning.
What a naive CEO!
The problem is the same that Target, and Barnes and Noble all have in competing with Amazon. Their sites aren't as good. They are spartan, uninteresting, hard to navigate, difficult to find things, and often so slow as to be unusable.
In short their developers, development managers, server staff, etc, aren't good enough.
On Amazon I can find what I need, the site looks good in all browsers including old ones, it doesn't bog down the CPU, stall or crash the browser, and products can be found using their own search mechanism without having to resort to using Google.
I wonder how many other places are just being bad amazon clones when their core value is something different...
Being a place to wander around and browse but never purchase the merchandise is not a "core value" any retailer wants to have. Barnes and Noble is not a home away from home, it's a store, no different than any other. You're meant to buy something and get out.
The key part of that being "before buying." Many people will literally just browse and use the free wi-fi and some will read entire books and magazines in the store without buying anything.
Starbucks, for example, makes lots of money from people who are just there for the free WiFi.
That said, my local B&N has a Starbucks inside (and a Peets 40 feet away directly across a small street), but I doubt they get more than a small fraction of the revenue from the Starbucks, and at around 4-5 times the floor space as the Peets.
Of course, the advantage of B&N is that anyone can pop in anywhere. A library doesn't make as much sense in an airport or mall.
Maintaining a large inventory of books is a financial burden for bookshops. For that reason, most massive bookshops in North America and Western Europe have slashed their book inventory heavily compared to the 1990s. In the place of books, they prefer to sell trendy things like vinyl records, Kikkerland products, teas, etc.. However, while a customer can spend a few minutes looking at what’s available, this kind of inventory does not offer many opportunities for “exploring”.
Also, even if customers would not order from B&N online, they might still order a book they see at B&N from Amazon, perhaps even while they are inside the B&N. Smartphones allowing customers to browse in your store and then order a desired item for cheaper from your competitor, were not yet a thing back in the 1990s when B&N was in its heyday.
Walmart is notorious for having terrible compensation for their tech staff--staff who are motivated to look elsewhere due to poor compensation aren't going to do good work no matter how good they are.
People work for a variety of things, but comp and colleagues are high on my list. If you give me crap for both and I have options to go elsewhere, you’ll be left with people who don’t have options to go elsewhere. They’re probably not going to end up being the cream of the crop.
Basically, you need competent people at every level. That said, since the competence of a level is directly controlled by the level above it, I guess it does just boil down to bad execs now or at some point in the past (or a good strategy not just working. The world isn't that deterministic).
This is not necessarily true. FAANG have great compensation and excellent reputations regarding the technical capabilities of their employees but people leave them or choose lower compensation offers at smaller companies over their offers all the time.
My point is: your observation that FAANG developers do accept lower comp for work elsewhere is not very convincing.
It happens frequently enough.
A lot of places see the website as just like a print media poster site to outsourced to the lowest cost provider and don't realise that it is now a core competence.
I'm going to assume even the smallest change to improve things requires a few months of meetings before its implemented. This quickly depresses anyone even halfway good at their job and they leave.
What could become an alternative would be a public decentralized protocol that many different retailers, warehouse operators, and delivery drivers could plug into. That is the sort of thing that could give consumers the selection of Amazon without putting control over everything in the hands of one company.
Walmart also has a huge network of actual stores, and I've ordered more than once for delivery at a store. The bigger issue is mindshare and branding. I often don't think to look for something at Walmart and it's often only in frustration of Amazon's abundance of choice or other issues I'll think of Walmart.
Beyond this, there are lots of other things that are just there at Walmart, and often don't need delivery to me, the store is enough. Walmart, iirc, covers something like 85% of the U.S. population with a store within 5 miles. That shouldn't be underestimated.
Walmart.com is not Jet.com. They actually compete against each other! Why any corporation would run two separate ecommerce operations that compete is beyond me.
- When Walmart bought Jet.com, they already had Walmart Marketplace, which is very much like Amazon in that it's products stocked, sold and shipped by Walmart themselves - but also many 3rd parties which stock, sell and ship on Walmart.com too.
- Just like on Amazon - most customers are not aware they're not buying directly from Walmart. Unlike Amazon, there's no built in messaging system (you end up directly emailing customers, and until recently they didn't even proxy the email addresses - meaning you obtained customer's real email addresses). Returns are sloppy and painful for the seller to handle, and the Seller Central UI hasn't changed in years. It's a "modern SPA" website, but each button click must be doing some poorly designed queries or something terrible, because each view takes multiple seconds to display (showing a busy spinner gif while waiting). This makes doing trivial things very painful in the UI.
- Walmart.com's API isn't stable either. It's on version 3 now, and still seems to lack important features like advanced reporting - features Amazon has had for the decade we've been selling there. When version 3 of the API rolled out, they gave everyone a months notice that all previous versions would be "deprecated" - although someone at Walmart things deprecated means turning it off completely. This left anyone foolish enough to integrate with this clunky API 1 month to rewrite everything since it was a major change.
- You still have to be invited to sell on Walmart.com. Unlike Amazon - not anyone can just apply for an account and start selling. This is a two-edged sword, of course. While it cuts down on random people selling out of their garage - it does limit the diversity of products and sellers on Walmart's Marketplace - and ultimately revenue Walmart.com can bring in.
- Walmart offers no "Fulfillment" options for their 3rd party sellers. While this is currently not necessary, since you must be a legit ecommerce business of a considerable size to even be invited to Walmart.com, it would be a great option for many to help cut down on delivery times and shipping fees by stocking some products on the other coast, or throughout the country. Many large operations on Amazon take advantage of the FBA program specifically for these reasons.
Now speaking about Jet.com - I'm not sure why Walmart didn't fold them into the Walmart.com branding. It's a disaster. It's been 2 years since we seriously looked at Jet.com, perhaps some things have changed - although I have my doubts due to how Jet.com wanted to operate.
We also have a Jet.com account - but chose not to participate because the barrier to entry was too high for such low projected sales.
- Jet.com requires API use to do anything. There is no Seller Central UI to manage products or orders.
This requires an API to even list a product. No CSV or Flat File uploads, which both Amazon and Walmart allow. No manually editing product details for a listing, or manually reviewing your orders via an Order Manager page.
While that may be good in that it makes the barrier to entry high enough to keep out casual garage sellers - it also kept out larger profitable operations like us. We took one look at it, reviewed their API, and decided it wasn't worth the development effort to get a handful of sales each week. At the time, there were no good integrations that we could just pay for either - not to mention they wouldn't integrate with our ERP software either - so we'd still have to spend the development time anyway.
Essentially, Walmart Corp is trying to run two, competing ecommerce websites - both with serious flaws that prevent either one from being easy or enjoyable for their sellers. Being customer-centric is great, but you have to at least make sure it's easy for your sellers to manage their operations on your platform - otherwise they will just choose to not participate or put enough energy into the platform to make it really great.
I imagine the same reason that Ford bought Jaguar. Segmentation.
Walmart bought Jet back before Jet had any real market share. Most figured they bought Jet to aquire their technology and people, namely Jet's founder.
And there's nothing shared between Jet.com and Walmart.com - unlike Ford being able to build Jaguar's in the same factory, or benefit from shared economies of scale. Walmart doesn't even sell on Jet.com, it's purely 3rd parties.
The brand means nothing to me, where walmart.com does at least have some brand presence.
I suspect it was simply the founders ego that kept jet.com as a separate site (rather than focusing on walmart.com). That alone is a bad sign, how many years have been wasted promoting Jet?
You are describing a benefit, not a drawback.
1: https://www.npr.org/templates/transcript/transcript.php?stor...
1: https://www.npr.org/templates/transcript/transcript.php?stor...
It also points towards the ability of other companies to compete with Walmart in niche areas (at least niche compared to Walmart). I could see a future where a few chains each carve out a chunk of the more popular Walmart inventory and out-compete Walmart on physical location, as Dollar General has done.
You can kind of imagine them as CPU cache layers. In-town local stores are L1 cache with great speed but relatively poor choice for all but the most common items, Walmart is L2 cache with good speed (not still slower for most, as it's a ways away for the majority of people) and better selection, and the internet is general memory with everything you might need, but slow speed. There has been a major upheaval in the L! level because of both a major shift in how close/fast and large L2 got (a shift from major cities to large complexes in rural areas) and a huge boost in general access (the internet), but I don't think it's all played out yet, since I think there's still need at the local level that's not fulfilled well anymore.
Sorry for the tortured analogy, but it did probably save time on both ends.
Intro: https://en.m.wikipedia.org/wiki/Monopolistic_competition
A competitor to Walmart would be in grave trouble (and shouldn't even try) if their gross margin was 1-3%.
This is of course the opposite of monopoly, and a Good Thing!
It would be good if someone managed to pull off "we're the trustworthy go-to, for supply chain integrity and real reviews, and we treat all suppliers/brands/workers/customers with a reasonable degree of respect". Walmart would have a long way to go for that, but could they possibly manage the corporate will to do it, out of desperation?
A company is losing money to give customers better service.
Its not selfless, but its a phenomena.
I have never enjoyed shopping more than with Walmart grocery pickup. And Walmart online is superior to Amazon (cost alone).
Is it bad to employ low wage workers?