Is it Follow the Leader or Lead the Follower?

Last week, Amazon announced it is working on plans to fundamentally change its Prime Two-Day shipping program into a One-Day shipping program.  For years now Amazon has been continually building and strengthening its fulfillment and logistics networks for precisely this reason.

Now today we have learned, (and not to be outdone), Wal-Mart is also moving in the same direction by offering Free One Day shipping on as many as 220,000 different items when Wal-Mart shoppers spend a minimum of $35.00.  Wal-Mart will be initially testing this new speedy delivery concept in Arizona and Nevada and then plan to roll it out into Southern California. From there it will obviously continue to grow in major areas of consumption.

Both companies have obviously been listening to their customers who are apparently obsessed with the need for faster and faster delivery.  Amazon believes it is so important to move in this direction that it has committed over $800 Million to make sure this works. Wal-Mart on the other hand believes it will actually save money because the items they plan to ship in this program will come in just one box.  Additionally the goods will come from a single warehouse that’s closest to Wal-Mart’s customers.

Interestingly, as both companies try to outdo one another, Wal-Mart’s e-commerce business currently is not profitable.  Wal-Mart is forecasting that it will lose even more money in 2019 than it actually lost in 2018. Can they really make up those loses by increasing volumes and expediting delivery times?  Apparently Wal-Mart thinks so.

Another contrasting factor is that Amazon’s Prime customers pay an annual fee currently pegged at $119, while Wal-Mart’s service will be available to most of its customers without any additional charges.  That is a huge difference in available funds to help make these programs financially successful.

Where all this ends up remains to be seen.  But one thing is for sure, we believe this is just the beginning of what will be an ongoing race between these two retail titans, as well as others who will be forced to join the game, for growth in on-line market share.  Each one committed to disrupting the disruptor. Hang on folks, more change is coming.