By Nicholas Varchaver
May 7, 2017

Good Morning.

Company battles don’t come much more Titanic than Wal-Mart (champion, physical stores division/20th century) vs. Amazon (champion, e-commerce division/21st century). “Can Wal-Mart’s Expensive New E-Commerce Operation Compete With Amazon?” in BloombergBusinessWeek, assesses the future of that rivalry. It focuses on how Wal-Mart is using its $3.3 billion purchase of Jet.com to really, truly, finally take it to Amazon.com. Or at least, that’s Wal-Mart’s hope. The center of the story is Jet.com founder Marc Lore who, in addition, to being a most un-Wal-Mart person (a New Jerseyan who used to drive a Tesla), also has some residual animus to Amazon (and vice-versa) over a past e-commerce transaction. And Lore isn’t just running his old outfit; he’s now spearheading Wal-mart’s entire e-commerce operation. The article establishes the stakes this way: “Wal-Mart has a lot riding on Lore. Last year he received $244 million in pay, 10 times that of his boss, Doug McMillon, Wal-Mart’s CEO. His project could determine the future of Sam Walton’s legacy and the eventual success of McMillon. It will also settle the score on whether Lore is good at building profitable e-commerce sites or just selling unprofitable ones to his competitors for piles of money.”

The piece is rich in insight on Wal-Mart’s past e-struggles:

Wal-Mart’s most significant fights were internal. One perennial source of tension involved prices. Amazon typically sets them using algorithms that scour the web to monitor and match the lowest number they find, which means prices can change constantly on the site. Wal-Mart sets a consistent “everyday low price” inside its stores. It’s one of the most sacrosanct brand promises in retail, practically inscribed onto holy tablets by Walton himself as a way to assure customers they won’t have to comparison-shop. The philosophy created problems on the web, though. Whenever the online price dropped below the in-store price, the merchants in Bentonville would balk. They were worried about siphoning away customers from their stores, which account for more than 97 percent of Wal-Mart’s sales.

Doug McMillon comes off as forward-looking in the article and his moves seem sensible. It’s true that every titan can eventually be dethroned, and presumably that will eventually happen to Amazon. But rare (apart from Apple) is the occasion when the upstart turns out to be the champion of a different era.

SPONSORED FINANCIAL CONTENT

You May Like