Monday, June 26, 2017

Welcome Back Wal-Mart - We Missed You Over the Last 5 Years.

I hesitated writing about the Amazon purchase of Whole Foods as many have written about it already and much is not yet known about how Jeff Bezos is going to use Whole Foods in the continued growth of his retail empire.  One thing for sure is whatever he does with it will be completely different than most people think.  That is what makes Bezos so brilliant and why no one has been able to beat him.  In some ways, only he knows what he really is doing.

But then I re-read an article I posted in March of 2013 titled, "The Battle for Retail is Really The Battle of Supply Chains".  In this article I opined that the big retailers are all essentially selling the same products, many of which have been or very quickly are commoditized.  This means the real value add of a retailer is in their supply chain.

I also concluded in this article that Wal-Mart should be able to kill Amazon as they already have the bricks and mortars along with the capability of great e-commerce.  Finally, I concluded that due to the age old issue of The Innovators Dilemma which was created by Clayton Christensen in his seminal book of the same name.  Unfortunately, for the last 4 years, and for Wal-Mart,  my prediction came true.

The good news is Wal-Mart, like the sleeping giant, has now been awoken.  With its purchase of it admitted it needed great e-commerce and, in the same transaction, admitted it could not do this on its own.  The big behemoth could not innovate so it had to buy.  That is OK as it is at least now on the path to competing with Amazon.

But then a funny thing happened.  Amazon admitted it could not grow bricks and mortars fast enough in the grocery space to compete so it made a bold purchase.  In this purchase, Bezos is essentially admitting he wants to move a little more towards a Wal-Mart model and also showed, in this purchase, the only reason Wal-Mart has not crushed Amazon is due to lack of execution and lack of strategic foresight.

Well, no more.  I believe Wal-Mart truly has awoke and they are starting to adjust their supply chain very quickly to mirror a "be where ever the customer is" retailer.  This means if you are out and need something quickly, you can pull into your Wal-Mart and get it.  If you want to order on line and have it shipped, you can do that.  If you want to avoid shipping charges, you can buy on line and pick it up in the store.  Basically, any configuration of how the consumer wants to interact to get the products she needs, Wal-Mart will be there.  Wal-Mart can ship from DCs or from any of its 4,177 stores of which 3,275 are super centers.  Wow!  Wouldn't Amazon love to have that footprint.

If Wal-Mart executes they have a chance of beating Amazon.  I recently used Wal-Mart on line to buy a UPS for my computer.  It was a great experience, shipped fast and was less expensive than Amazon.

I do think the speciality retailer is dead.  Consumers want the "endless aisle" that Amazon and Wal-Mart provide. They do not want to bounce around to 100 different websites to find what they want.

Wal-Mart can do everything Amazon can do (or they should be able to do it) yet Amazon cannot come close to all the capabilities of a Wal-Mart.  If I were investing, the only stock I would buy in the retail space is Wal-Mart.  I would then go to their shareholders meeting and scream two phrases:  "Wake Up" and "Execute"!

Welcome back Wal-Mart - I missed you!

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