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OPINION

Walmart targets Amazon

Walmart targets Amazon
September 3, 2020
Walmart targets Amazon

And because its products are essentially incompatible with other devices, punters are compelled to exclusively purchase Apple apps or accessories. Apple may have enjoyed an almost cult-like status when Steve Jobs was alive, but research from professional services group Accenture indicates that brand loyalty is becoming a more elusive quality.

Like any other business, the trillion-dollar enterprise was never invulnerable, but it is debatable whether the brand cache is quite as strong it used to be, even though the shares remain as well supported as they have ever been.

Likewise, Google parent group Alphabet (US:GOOGL), which has just posted a 52-week high. Short of some revolutionary technological innovation, it is difficult to imagine how any competitor would be able to arrest the group’s growing dominance in online search, video content sharing, and internet advertising markets.

The group has achieved its primacy in these markets through its early mastery of search algorithms, in addition to the widespread adoption of its Android mobile operating system, which accounts for around three-quarters of global usage.

The sheer volume of data gathered through its numerous products and services – many of which were the result of M&A – provides a key competitive advantage. However, this is now being viewed as a double-edged sword, particularly as machine learning becomes ever more advanced. The extent and application of the group’s user data harvesting – and its blatant obfuscation and secrecy – has unnerved many end users and could conceivably draw a much stronger response from regulators going forward.

There are any number of business practices that have been brought into question. For example, the proliferation of paid links from advertisers at the top of the Google search page means that a much greater proportion of users never access the open web at all, instead opting for information provided by Google itself. There is a clear conflict of interest assuming the search engine’s primary function is to provide dispassionate analysis of the site’s user preferences. Little wonder that nearly every state regulator in the US has their sights trained on the tech giant.

Though both Apple and Alphabet enjoy market-leading positions, it is conceivable that the former’s advantage could be eroded through intensified competition, while the latter tech heavyweight could eventually fall foul of antitrust regulators. It has been posited that a Democrat victory in the upcoming US election would reduce the chances of enforced break-ups given vice-presidential candidate Senator Kamala Harris's close links to Silicon Valley. 

Like Alphabet, Amazon (US:AMZN) has thrived during the pandemic, but until recently you would have thought the threat of antitrust regulators would have posed the principal threat to the business. But midway through this month will see the launch of Walmart+, the eponymous retailer’s answer to the Amazon Prime subscription service.

Walmart (US:WMT) is one of the few retailers with the financial clout and logistical capacity to make a sizeable dent in Amazon’s volumes, at least in the US, where the latter accounts for around 40 per cent of online retail sales, largely the result of the delivery benefits linked to the Prime service.

The monthly subscription rate for Walmart+ at $12.95 is broadly in line with that of Amazon. For that outlay, customers can expect same-day delivery on more than 160,000 items, including tech, toys, household essentials, and groceries. There is also a ‘Scan & Go’ option, which will enable members to significantly speed up the shopping process at Walmart’s bricks-and-mortar outlets. There are no streaming services available, and limited pricing benefits given that the retailers already price-match each other. But members will be entitled to receive fuel discounts at Walmart’s petrol stations. It is thought that the discounting may eventually extend to Walmart pharmacies.

The new service is essentially a rebranding of the existing Delivery Unlimited service, albeit with a few bells and whistles attached. This is not the first time that Walmart has tried to replicate Amazon’s success in the online retail space, but you are left wondering whether the enhanced online offering is aimed at preserving Walmart’s existing customer base, rather than eating into Amazon’s outsized share of the market.