4 Ways Walmart's Following Amazon's Playbook

Over the last 25-plus years, Amazon (NASDAQ:AMZN) has transformed from merely a retail company to a collection of services for merchants, enterprises, and consumers. That’s a playbook its competitors are eager to follow, and Walmart (NYSE:WMT), largely following in Amazon’s footsteps, has dramatically expanded its operations over the last couple of years.

Here are four ways Walmart’s copying Amazon’s playbook.

Three Walmart boxes moving down a conveyor belt.

Image source: Walmart.

Omnichannel services

Walmart’s most recent efforts to expand its services include offering its omnichannel sales technology and delivery services to other retailers.

Over the last few years, Walmart has built out its omnichannel capabilities. The highlight is its curbside grocery service (which now includes more general merchandise). Curbside pickup is now available at over 3,900 Walmart stores in the U.S. Walmart’s also rapidly expanded its delivery network to offer same-day delivery on items from over 3,250 of those stores.

Now, Walmart is offering access to its software to facilitate similar online orders for other merchants and retailers, as well as opening its delivery network to other local businesses.

While there’s no exact analog within Amazon, the company follows the playbook Amazon perfected. It builds something for its own internal operations, and then it uses its scale to offer it at a relatively low price to other businesses. The marginal profits from following that model can be substantial, since many of the operating costs are already baked into the larger retail business.

Walmart+ vs. Prime

Where Amazon really stands out from its competitors is its Prime membership program. The e-commerce giant counts over 200 million global subscribers, and that’s a big reason Amazon’s merchant services, like advertising and FBA, have been so successful. Prime drives customer loyalty to Amazon.

Walmart has been working on a Prime competitor for years, and its latest iteration is Walmart+. Unfortunately, the success of Walmart+ is also a big uncertainty. While Walmart initially signed up millions of customers to the program focused on unlimited grocery delivery and fuel discounts, it’s having a hard time keeping them engaged and subscribed. 

That’s a real problem for Walmart, as it needs to build both sides of its network — merchants and customers — to have Amazon-level success with e-commerce. If it can’t attract enough customers to Walmart.com, the value of its fulfillment and advertising services is diminished. And with the heavy capital investment in building out the fulfillment network, it could be a big drain on cash and operating expenses if Walmart doesn’t have enough demand to utilize its full capacity. 

Amazon won’t have any qualms if Walmart or other competitors want to copy its playbook. Building an organization as large as Amazon is a lot harder than it looks.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.

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