Homepage / Currency / The beast of Bentonville battles Amazon, the king of the e-commerce jungle
Amazon says this Prime Day was its biggest shopping event ever Kudlow says President Trump is 'so dissatisfied' with China trade talks that he is keeping the pressure on As stocks regain their footing, an ominous warning looms Goldman Sachs downgrades Clorox to sell, says valuation is 'unsustainably high' How Satya Nadella has spurred a tripling of Microsoft's stock price in just over four years Kudlow says economic growth could top 4% for 'a quarter or two,' more tax cuts could be coming The one chart that explains Netflix’s stunning comeback US housing starts plunge 12% in June to a nine-month low Aerospace titans Boeing and Airbus top $110 billion in orders at Farnborough Target uses Prime Day to its advantage, logging its 'biggest online shopping day' so far this year Billionaire Marc Lasry sees bitcoin reaching up to $40,000 as it becomes more mainstream and easier to trade These are the 10 US airports where you're most likely to be hacked Amazon shares slightly higher as investors await Prime Day results Wreck of Russian warship found, believed to hold gold worth $130 billion A bullish ‘phenomenon’ in bond market is weeks away from fading, top credit strategist says Stocks making the biggest moves premarket: MS, GOOGL, TXN, UAL, NFLX & more Twitter shares up 50% since late April means most upside priced in, analyst says in downgrade EU fines Google $5 billion over Android antitrust abuse Mortgage applications fall 2.5% as buyers struggle to find affordable homes America may not have the tools to counter the next financial crisis, warn Bernanke, Geithner and Paulson Investors are getting spooked as the risk of a no-deal Brexit rises EU expected to fine Google $5 billion over Android antitrust abuse Ex-FBI chief James Comey urges Americans to vote for Democrats in midterm elections Elon Musk apologizes to British cave diver following baseless 'pedo guy' claim Disney, Comcast and Fox: All you need to know about one of the biggest media battles ever Xiaomi shares notch new high after Hong Kong, mainland China stock exchanges reach agreement The trade war is complicating China's efforts to fix its economy European markets set for a strong open amid earnings; Google in focus Hedge fund billionaire Einhorn places sixth in major poker tournament The biggest spender of political ads on Facebook? President Trump Asian stocks poised to gain after Fed's Powell gives upbeat comments; dollar firmer Stocks are setting up to break to new highs Not all FAANG stocks are created equal EU ruling may be too little, too late to stop Google's mobile dominance Cramer explains how Netflix's stock managed to taper its drop after disappointing on earnings Airbnb condemns New York City's 'bellhop politics,' threatens legal retaliation Amazon sellers say they were unfairly suspended right before Prime Day, and now have two bad choices Investor explains why 'duller' tech stocks can have better returns than 'high-flying' tech names Elon Musk is 'thin-skinned and short-tempered,' says tech VC Texas Instruments CEO Brian Crutcher resigns for violating code of conduct Google Cloud Platform fixes issues that took down Spotify, Snapchat and other popular sites Uber exec: We want to become the 'one stop' transportation app 'What a dumb hearing,' says Democrat as Congress grills tech companies on conservative bias Amazon shares rebound, report says Prime Day sales jumped 89 percent in first 12 hours of the event How to put your medical history on your iPhone in less than 5 minutes Investment chief: Watch these two big events in 2018 Even with Netflix slowing, the market rally is likely not over Cramer: Netflix subscriber weakness debunks the 'sky's the limit' theory on the stock Netflix is looking at watch time as a new area of growth, but the competition is stiff Why Nobel laureate Richard Thaler follows Warren Buffett's advice to avoid bitcoin Rolls-Royce is developing tiny 'cockroach' robots to crawl in and fix airplane engines After Netflix plunge, Wall Street analysts forecast just tame returns ahead for the once high-flying FANG group Roku shares rise after analyst raises streaming video company's price target due to customer growth China is investing 9 times more into Europe than into North America, report reveals Amazon says US Prime Day sales 'so far bigger than ever' as glitch is resolved Netflix is on pace for its worst day in two years US lumber producers see huge opportunity, rush to expand San Francisco to consider tax on companies to help homeless Homebuilder sentiment, still high, stalls as tariffs, labor and land drive up costs Powell backs more rate hikes as economy growing 'considerably stronger' Netflix history is filled with big stock declines – like today – followed by bigger rebounds Intel shares get downgraded by Evercore ISI due to rising competition from Nvidia, AMD Petco aims to reinvent the pet store with something you can't buy online Genetic testing is coming of age, but for consumers it's buyer beware Tech 'FAANG' was the most-crowded trade in the world heading into the Netflix implosion, survey shows Netflix weak subscriber growth may indicate a 'maturity wall' that could whack the stock even more: Analyst This chart may be predicting the bull market's demise Wall Street says Netflix's stock plunge is a ‘compelling’ buying opportunity because the streaming giant ‘never misses twice’ Tesla sinks after Musk tweets, again Boeing announces new division devoted to flying taxis Stocks making the biggest move premarket: NFLX, UNH, GS, AMZN, WMT & more Deutsche Bank downgrades Netflix, but says big subscriber miss is not 'thesis changing' IBM is experimenting with a cryptocurrency that’s pegged to the US dollar North Korea and Zimbabwe: A friendship explained Virgin Galactic spinoff Orbit to launch rockets from the UK with space deal Artificial intelligence will create more jobs than it destroys? That’s what PwC says ‘Treasonous’ Trump and ‘Putin’s poodle:' Scathing headlines follow the Trump-Putin summit China’s fintech companies offer ‘enormous’ opportunity, investment manager says Trump's performance at summit with Putin was 'unprecedented,' experts say Walmart and Microsoft link up on cloud technology as they both battle Amazon European stocks seen mixed amid earnings; Fed’s Powell to address Congress How I knew I should quit my day job and run my start-up full-time: Viral website founder China's stocks have been trounced, but the trade war may ultimately be good news for those shares Billionaire tech investor Peter Thiel bets on crypto start-up Block.one Asian shares subdued open after mixed close on Wall Street; energy stocks under pressure Amazon cloud hits snags after Amazon Prime Day downtime Netflix isn't doomed by one quarter unless people start questioning the long-term investor thesis Tech stocks set to sink on Tuesday after rough evening for ‘FANG’ Netflix plummets after missing big on subscriber growth This wristband lets humans control machines with their minds The U.S. has a rocky history convincing Russia to extradite computer criminals Amazon suffers glitches at the start of Prime Day Jeff Bezos is now the richest man in modern history 'The United States has been foolish': Read Trump and Putin's full exchange Goldman Sachs recommends these 5 highly profitable companies — including Nvidia — to combat rising inflation Goldman Sachs releases 'tactical' stock picks for this earnings season Three red flags for Netflix ahead of its earnings report The bond market may be raising recession fears, but don't expect one anytime soon Cramer: Banks are 'making fortunes' but are still as hated as they were during the financial crisis Putin told Trump at summit: Russia never meddled in US election


The beast of Bentonville battles Amazon, the king of the e-commerce jungle

A BOA constrictor swallowing capitalism. A cyclone dragging the economy into its vortex. If you look back at how people described Walmart a decade ago, it is eerily similar to how Amazon is viewed now. The supermarket chain has “a scale of economic power we haven’t encountered before”, warned “The Walmart Effect”, a best selling book in 2006. But capitalism never stands still. The world’s largest company by sales is now the perceived underdog in an escalating grocery war with Amazon to fill 320m American bellies. The struggle will probably end in a messy stalemate. That will mean mediocre returns for investors—and happy days for consumers.

Just when Walmart’s aura was at its most intimidating, in 2006, stagnation beckoned. Its reputation for bullying its suppliers and staff became toxic. Over the next decade it hit saturation point. About 95% of Americans shop at Walmart at least once a year. It has three square feet of shop space for every adult in the country and has sunk $83bn into a fixed-asset base that is the fourth-largest owned by any American firm. Investors have worried for years that this empire of aisles and tills run from Bentonville, Arkansas, would become obsolete—what did Walmart’s executives, schooled in the arts of beating up baked-beans suppliers, know about the slick world of e-commerce being dreamed up in Silicon Valley and Seattle?

  • Supervisors declare global bank-capital standards completed

  • Donald Trump’s Jerusalem move sparks Christian disputes

  • Retail sales, producer prices, wages and exchange rates

  • Foreign reserves

  • What the Yugoslav war-crimes tribunal achieved

  • Democrats take a strong line on sexual misconduct in Congress

More than you might think. This year Walmart’s shares have risen by 40% on hopes that it has more than a fighting chance. It is clear that selling groceries online is very different from selling books. In food, penetration of e-commerce is low, at 2%, compared with 9% for all retail. Food is perishable. People will not stuff it in their mouths unless they trust its provenance. They also want flexibility—to buy food in a store, to order online and pick it up themselves, or to have it delivered to their homes. So some physical infrastructure is helpful. “I wouldn’t want another set of assets,” Doug McMillon, Walmart’s boss, told the Economic Club of New York in November.

He has run Walmart’s businesses in Europe and Asia, where e-commerce for groceries is more developed. In 2016 Walmart spent $3bn buying Jet.com, an e-commerce firm whose boss, Marc Lore, now runs all Walmart’s online operations. Walmart has launched internet-based services such as “Easy reorder” and “Pickup discount” and formed a partnership with Latch, which lets its users open and lock their front doors remotely. On September 29th it acquired Parcel, a logistics startup. On December 6th it changed its legal name from Walmart Stores, to just Walmart.

There are three reasons to be optimistic. First, Walmart’s performance has improved. In the most recent quarter, same-store sales rose by 2.7% year on year, and store traffic by 1.5%. Food sales increased at their fastest pace in six years. Sales from e-commerce represent only about 2% of the total but are rising at an annual rate of 50% (customers who shop online and in stores typically spend twice as much as those who only go to stores). Walmart has the second-most-downloaded retail app, after Amazon’s.

Second, Amazon’s behaviour is a backhanded compliment. In June it spent $14bn on Whole Foods, a mid-sized grocery chain, The deal brings Amazon more physical locations to sell, sort and dispatch goods. It also gives it trusted private-label brands, of the kind Walmart already has. If you type “spinach” into Amazon.com, bags of Whole Foods branded greenery appear.

Lastly, the example of China points to a fusion of the online and physical worlds. In some ways the country is more advanced than America; e-commerce comprises 9% of grocery sales, according to Alliance Bernstein, a research firm. On November 20th Alibaba, an e-commerce giant, bought 36% of Sun Art Retail, a hypermarket retailer. Four of the six biggest Chinese supermarket chains have partnerships with e-commerce platforms. (Walmart, which has 424 stores in China, has teamed up with JD.com.)

The duel between Walmart and Amazon could go in two directions. It might escalate into a war across America, for both companies hate losing. Or each firm might conquer different geographical areas and demographic groups. Amazon could seize well-to-do cities, where population density is high and home delivery is more efficient. Walmart could continue to rule suburbia.

Either way, margins will probably be squeezed as Amazon throws money at the fight with its customary abandon. Mr McMillon knows this. “One of the challenges at Walmart is that we don’t have free money—we are expected to make a profit,” he says. The danger is that it overestimates how much physical presence it needs. If it went back to its position in 2006, it could cut its domestic asset base by 34% and still have 90% of Americans within 15 miles of a store. For every dollar of sales, it has twice as many square feet of sales and distribution space as Amazon’s retail operation (including Whole Foods). If Mr McMillon is brave he will sell stores and return capital to investors. Walmart needs to make its balance-sheet leaner.

What’s in store for Amazon

Walmart is probably the most formidable adversary Amazon has ever faced. Disrupting the music, book and media industries, each known for their Corinthian spirit and long lunches, was child’s play compared with taking on Walmart, with its fanatical commitment to low prices.

Walmart’s history is also a warning. If you examine the two companies’ financials, Amazon today looks almost identical to Walmart in 1999. It has annual sales of $160bn or so, low margins, fast growth, a ballooning asset base and massive capital investment. The firm’s managers are on a high and investors have dizzying expectations for the future. But for the ten years after 1999, Walmart’s share price was as flat as a pancake, because all the good news was already baked in. The actual business of world domination turned out to be a long, hard slog.

Source: economist
The beast of Bentonville battles Amazon, the king of the e-commerce jungle

Comments are closed.