Walmazon: Superstores and E-Commerce Hybrids Are Grabbing More Market Share
Just last week, Walmart made headlines when they announced that they expect online sales to increase by 40% in the next fiscal year. The news sent shares on their biggest intraday surge since May 2016. Amazon has purchased Whole Foods and currently adds 1 million square feet of warehouse space each week. Walmart has also purchased e-retailers Jet.com, Bonobos, and ModCloth.
When companies like Walmart and Amazon make big announcements, the market takes notice. These companies have vast resources to pour into new initiatives and business development. Those resources, coupled with their ability to offer products at cheaper prices, put smaller competitors in a difficult spot.
This news has major implications for other retailers who compete directly with Walmart and Amazon (and compete to stock their shelves and warehouses)—especially smaller companies. Since competing on price may not be an option, businesses have to look to other options as Walmart expects to grow.
What Does This Mean for Retailers and CPG Brands?
Last week’s news forecasts significant growth in Walmart’s online sales. Other large retailers, such as Amazon, also expect sales increases over the next fiscal year.
Both retailers have developed their private label products (formerly known as “generics”) at price points where most other retailers and CPG brands cannot compete. Steve Olenski points out in recent Forbes article that, just as Amazon has developed and promoted its own line of batteries that rival established battery brands and undercut their prices, it may now do the same with grocery products—and more—using Whole Foods’ private label as a start.
For your brand to control the potential damage of these huge mergers, you need to distinguish yourself based on something other than price. You need to connect to your customers in a way that establishes a bond that lower-priced options won’t break.
Next up: What small and mid-size brands can do to survive and flourish in this evolving environment.
Hint: Whether you’re a retailer or one of the many brands that wants to stock their (real and metaphorical) shelves, the answer is not ‘price.’