Walmart Has Made a Genius Move to Beat Amazon | Hacker News Reader

Walmart Has Made a Genius Move to Beat Amazon

forbes.com

2 pointskkcorps3 comments

I mean, they talk about Walmart like it's the underdog, but its revenue is twice as large as Amazon's (despite its market cap being much lower). While Walmart is much better at sales via physical stores and Amazon is better at online sales, and while Walmart is investing in heavily in it's online platforms, Amazon is investing heavily in in physical stores. So i don't think it's Walmart vs Amazon, it's Walmart and Amazon versuses everyone else. They're both building themselves up to be equal competitors in most ways, leaving everyone else behind.

The problem for Amazon is that physical retail comes with higher costs and lower returns than its traditional business. Essentially Amazon is chasing diminishing returns and Walmart is chasing increasing returns. I'd put it this way, online sales increase Walmart's revenue per square foot and retail stores decrease Amazon's revenue per square foot because prime retail space is expensive. Even if Amazon builds out a retail store network, Walmart's basis will generally be much lower because it bought its real-estate long ago.

An anecdote to put Walmart's lead in perspective. In the early 1990's, I worked for a subcontractor on one of Walmart's distribution centers. More than a million square feet in a cow pasture strategically between Tampa, Orlando, and Ocala. Walmart probably acquired the land during the S&L crisis when commercial real-estate prices cratered. If Walmart floated a thirty year note, the title would be just about clear now. In the interim, the markets the distribution center could serve have grown massively. But the way real-estate works means that there aren't any better physical addresses than there were back then.

This is truly brilliant and an example of using your core competency to compete better. Wal-Mart made it where they are today by vastly improving logistics. Headquarters knew when one tube of toothpaste left a store before Amazon even sold toothpaste. I think this idea could keep Wal-Mart in the game for a long time.

Reply on news.ycombinator.com