Amazon should be worried about Walmart, according to enjoy.com chief executive officer and founder Ron Johnson. He also suggested that it could fight back using another big acquisition.
“I think this is a decade-long price fight. Every quarter is a new round, but Walmart’s coming back,” Johnson said in an interview.
Johnson, the former CEO of JC Penney, has been bullish about Walmart since February. On Thursday, Walmart shares exhibit their best performance in nine years. The stock was up 44 percent year-to-date, seemingly affirming Johnson’s predictions, which suggested that Walmart to be the biggest threat to Amazon.
Moreover, Johnson thinks that even though Amazon has been growing quickly, Walmart has a definite advantage with its preexisting brick-and-mortar structure. He indicated that a majority of Americans are living nearby a Walmart store, where they can buy most of the products also available on Amazon.
Amazon continues to invest in different distribution centers, while Walmart has decided to slow store growth. Walmart is focusing on technology, which it needs to improve its stores.
Furthermore, Johnson also pointed out that Amazon’s centers cost more money and are less efficient to run compared with Walmart’s stores and warehouses.
“They forward deploy inventory into things called warehouses that are really stores. They are a lower cost operation than Amazon’s distribution centers,” said Johnson. “Having that distribution footprint with that inventory forward deployed is an advantage that is hard to beat.”
On Amazon’s side, Johnson believes that acquisitions, such as that of Whole Foods, are good moves.
“Whole Foods is to grocery what Target is to mass. It’s the upscale discounter,” Johnson added.
The former CEO said that he didn’t expect any mega-acquisition soon, but stated that he believed Target has all the right space and locations for Amazon to stay on top of the rivalry.
“Target’s got 1,500 stores on Main and Main of every city in the country,” he said.
Growth for Walmart
On Thursday, Walmart apparently offered some evidence that its efforts have been paid off.
Online sales soared 50 percent, according to the company. Additionally, Walmart’s stock climbed roughly 9 percent to an all-time high after the announcement.
“Walmart is firmly on the advance, both in its home market and elsewhere. From our data, it is clear that Walmart is not only getting existing customers to spend more online but is also attracting new shoppers,” said Neil Saunders, who is the managing director of GlobalData Retail.
The growth in its online sales did well for Walmart, since a critical holiday season is fast approaching. Last year, the retailer had $486 billion in revenue, which was three times more than what Amazon had. It has spent this year aggressively while expanding its online reach.
Last month, the company bought Parcel, which is a courier service provider, as part of its effort to provide same-day deliveries in New York. Its $3.3 billion acquisition of jet.com last year could be considered another effort in that endeavor.
Its website has also been enhanced, and it now offers around 70 million items, which are more than three times what it offered last year. It also carries high-end brands like KitchenAid and Bose.
This week, the company announced that it would begin selling items from Lord & Taylor, an upscale department store.
“Our goal is to create a premium fashion destination on Walmart.com. We see customers on our site searching for higher-end items, and we are expanding our business online to focus on adding specialized and premium shopping experiences,” said Denise Incandela, head of fashion for Walmart US eCommerce.
Revenue catapulted 4.2 percent to $123.18 billion in the latest quarter. US store sales open last year jumped 2.7 percent from a year earlier, which top officials attributed to sales growth.
“The food business, in particular, has accelerated with our fresh meat, bakery, and produce teams leading the way,” said Doug McMillion, chief executive of Walmart. “We have momentum.”
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