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July 18, 2016

When Retail Giants Collide

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July 12, 2016 marked the second (presumably annual) Amazon Prime Day. With one-day markdowns and plenty of marketing, Amazon Prime Day 2016 turned out to be the biggest sales day in the company’s history, with worldwide orders increasing by 60 percent compared with Prime Day in 2015.

In what was not at all a coincidence, Wal-Mart offered free, no-minimum shipping on all orders for five days – starting July 11, the day before Amazon’s Prime Day. The promotion was more inclusive than Amazon’s offering, which was only available to Prime subscribers, and Wal-Mart had hoped to highlight the elitist nature of Amazon’s deals.

This scuffle isn’t the first time the two retail giants have gone head-to-head in the e-commerce space.

The Drone Wars

In what Gizmodo has called “a retailer arms race” Amazon and Wal-Mart are facing off in a battle to implement drone technology into their processes.

Amazon’s Approach: It seems as though we’ve been hearing about Amazon’s quest to implement drone-based package delivery for years now. The dream is simple – a delivery system that unites consumer and package in 30 minutes or less. The reality? It turns out the FAA is less than excited about drones flying around, unrestricted, through dense urban areas. With safety and environmental concerns about the venture popping up just about everywhere, Amazon’s journey remains an uphill struggle chock-full of zoning proposals and intensive negotiating.

Wal-Mart’s Approach: Wal-Mart hasn’t given up on the possibility of drone-based home package delivery, but they have outsmarted Amazon when it comes to creatively using drones for other purposes. While Amazon, Google and Wal-Mart wait with bated breath to hear from the FAA about using drones to deliver packages, Wal-Mart has been advancing an idea to leverage existing regulations for commercial drone use, and will begin using drones exclusively within the boundaries of its own warehouses in the next 6-9 months.

Why do it? Because for drones to take inventory, with their 30-frames-per-second image-capturing ability, takes just one day. A fraction of the time it takes human workers, who take about a month.

The Last (Green) Mile

The “last mile” is a term used in supply chain management that refers to the movement of goods from a transportation hub to a final, in-home destination. For e-commerce consumers this means the very last leg of a package’s journey – ending when it lands on your front porch. For many e-commerce retailers, taking control of the last mile is a way to guarantee efficient delivery.

For clothes, furniture and many other consumer packaged goods, e-commerce has found huge success. The latest last-mile development for these retail giants, however, is in grocery delivery.

Amazon’s Approach: Since 2007 Amazon has been delivering groceries door-to-door in select metropolitan areas through its bright green, trademarked AmazonFresh trucks. AmazonFresh offers free same-day and early morning delivery on orders over $50. The idea? Have your groceries at your door in time for dinner or breakfast – provided you place your order in time. Not limited to grocery, shoppers have the ability to add grooming products, tech and other items to their order. They also offer to deliver pre-made meals, fresh-baked breads and other goods from local shops and restaurants. The catch is that it’s an extra $200 on top of a $99 Prime Membership.

Wal-Mart’s Approach: More recently, Wal-Mart has unveiled plans to launch a grocery delivery service of its own – and it’s planning to leverage third party car-sharing services like Uber and Lyft to conquer the last mile. Here’s how this strategy works: shoppers will place their online orders through grocery.walmart.com and then request a ride as if they were expecting curbside pickup. Then, specially trained Wal-Mart Personal Shoppers will fulfill the order, selecting the best meat and produce, and place it in a temperature-controlled, in-store holding area. When a customer elects for home delivery – for an additional $7 to $10 delivery charge – Wal-Mart will request an Uber (or Lyft or Deliv) using the service’s standard app and the driver will be handed the prepared order to bring to the customer’s location.

Who Will Emerge Victorious?

In all technical aspects, Wal-Mart seems to be doing better than Amazon. Its use of drones in inventory is more inspired and has a more immediate effect than the waiting game that Amazon is playing for drone-based delivery. When it comes to grocery delivery, there’s no doubt that a $7 to $10 price tag is a little more enticing than a $299 package deal. Most users are also already comfortable using Uber and Lyft apps, and third-party delivery through these applications could be much faster and more flexible than Amazon’s system. There are, however, a few signs that bode well for Amazon. The first is sentiment. People don’t seem to like Wal-Mart. They’ve had a number of scandals involving treatment of workers, such that they’re seen by many as an evil beast of retail, whereas for the most part, sentiment surrounding Amazon is almost entirely positive. The other is simply that Amazon has had more time to improve on the technical and quality-control aspects of its grocery service. Wal-Mart, on the other hand, is bound to face growing pains as it branches into far less familiar territory.

In the end, there’s something more exciting about the way Wal-Mart is approaching e-commerce. They seem to be thinking outside of the box – while keeping a toe inside. If and when the FAA clears drone delivery, they’ll be ready, but until then they’ve outsmarted Amazon. While Amazon tinkers in truck delivery reminiscent of a 20th century milkman, Wal-Mart is capitalizing on the growing car-share trend. For once, Wal-Mart seems more in touch with consumers’ behaviors; and it’s this attention that will likely give them an edge in this retailer’s cold war.