WSL Future of Health Event

Rumors of Walmart’s decline exaggerated

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A recent story on Time.com that appears under the headline "This Is Why Amazon Is Dominating Walmart Now" paints an unflattering portrait of the world’s largest retailer.

A recent story on Time.com that appears under the headline "This Is Why Amazon Is Dominating Walmart Now" paints an unflattering portrait of the world’s largest retailer.

It argues that it is mired in business as usual while its Web-based rival is busy sowing the seeds for continued growth and future success in new ventures, many of which extend beyond retailing.

The rise of Amazon has truly been phenomenal. As the Time.com article points out, the sales gap between the two companies has narrowed considerably, with Walmart’s 16-fold advantage in 2012 reduced by two-thirds. But it should be remembered that rapid growth is not unusual for an innovative business model that is well executed, something Walmart knows from its own ­experience.

The piece goes on to laud Amazon for reinvesting a substantial portion of its revenue in building the business. Walmart, by contrast, is characterized as having to devote billions of dollars to dividends and stock buybacks in order to keep shareholders from selling. The stage of development at which each of the companies finds itself needs to be kept in mind. Amazon is just over 20 years old and is in its prime growth phase, one where investors are willing to defer potential dividends to fuel that expansion, a situation that won’t last forever. Walmart is a mature business whose shareholders expect a fair return.

That’s not to say that Walmart doesn’t have issues that it needs to address. Sales gains, particularly on a comparable-store basis, have been hard to come by of late, and the company’s e-commerce presence will need a lot of enhancement before it rivals Walmart’s clout in brick-and-mortar retailing.

Management at Walmart is well aware of those shortcomings and has developed a sound strategy to deal with them. The challenge is to implement the program in a timely manner across more than 10,000 stores in 27 countries and an e-commerce platform. It’s no easy task to alter the direction of a ship that size (one has to add the sales of the six next biggest U.S.-based retailers, including Amazon, to eclipse Walmart) but the process is well under way.

If Walmart can achieve its objective of delivering a seamless omnichannel experience and reinforce its traditional commitment to price leadership, it will be a long time before Amazon or anyone else overtakes it.


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