Amazon vs walmart case study answers

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Case Study Who’s The World’s Top Retailer? Walmart and Amazon Duke It Out

Walmart is the world’s largest and most successful retailer, with $476 billion in fiscal 2014 sales and nearly 11,000 stores world-wide, including over 4,000 in the United States. Walmart has 2 million employees, and ranks Number 1 on the Fortune 500 list of companies. Walmart had such a large and powerful selling machine that it really didn’t have any serious competitors. No other retailer came close—until now. Today Walmart’s greatest threat is no other than Amazon.com, often called the “Walmart of the Web.” Amazon sells not only books but just about everything else people want to buy—DVDs, video and music streaming downloads, software, video games, electronics, apparel, furniture, food, toys, and jewelry. The company also produces consumer electronics—notably the Amazon Kindle e-book reader. No other online retailer can match Amazon’s breadth of selection, low prices, and fast, reliable shipping.

For many years, Amazon has been the leader in online retail and is now the world’s largest e-commerce retailer. It, too, has a very large and powerful selling machine, although it has primarily focused on selling through the Internet. But if Amazon has its way, that’s about to change, because it dearly wants to move in on Walmart’s turf.

Walmart was founded as a traditional, off-line, physical store in 1962, and that’s still what it does best. But it is being forced to compete in e-commerce, whether it likes it or not. Six or seven years ago, only one-fourth of all Walmart customers shopped at Amazon.com, according to data from researcher Kantar Retail. Today, however, half of Walmart customers say they’ve shopped at both retailers. Online competition from Amazon has become too tough to ignore.

Why is this happening to Walmart? There are two trends that threaten its dominance. First, Walmart’s traditional customers—who are primarily bargain hunters making less than $50,000 per year—are becoming more comfortable using technology. More affluent customers who started shopping at Walmart during the recession are returning to Amazon as their finances improve. Amazon has started stocking merchandise categories

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that Walmart traditionally sold, such as vacuum bags, diapers,and apparel, and its revenue is growing much faster than Walmart’s. In 2013, Amazon had sales of nearly $67 billion, compared to online sales of about $9 billion for Walmart.

If more people want to do even some of their shopping online, Amazon has some clear cut advantages. Amazon has created a recognizable and highly successful brand in online retailing. The company has developed extensive warehousing facilities and an extremely efficient distribution network specifically designed for Web shopping. Its premium shipping service, Amazon Prime, provides fast “free” two-day shipping at an affordable fixed annual subscription price ($99 per year), often considered to be a weak point for online retailers. According to the Wall Street Journal, Amazon’s shipping costs are lower than Walmart’s, ranging from $3 to $4 per package, while Walmart’s online shipping can run $5–$7 per parcel. Walmart’s massive supply chain needs to support more than 4,000 physical stores worldwide, which Amazon doesn’t have to worry about. Shipping costs can make a big difference for a store like Walmart where popular purchases tend to be low-cost items like $10 packs of underwear. It makes no sense for Walmart to create a duplicate supply chain for e-commerce.

However, Walmart is no pushover. It is an even larger and more recognizable brand than Amazon. Consumers associate Walmart with the lowest price, which Walmart has the flexibility to offer on any given item because of its size. The company can lose money selling a hot product at extremely low margins and expect to make money on the strength of the large quantities of other items it sells. Walmart also has a significant physical presence, with stores all across the United States, and its stores provide the instant gratification of shopping, buying an item, and taking it home immediately, as opposed to waiting when ordering from Amazon. Two-thirds of the U.S. population is within five miles of a Walmart store, according to company management.