From Forbes on August 12, 2016:
The recent record-setting acquisition of e-commerce start-up Jet.com has certainly given Wal-Mart Stores its fair share of headlines lately. The deal, which is still subject to regulatory approval, has been heralded as Wal-Mart’s strike back at rival Amazon.com and a jolt to the discounter’s standing in the digital retail arena, vis-à-vis Jet.com’s innovative Smart Cart technology as well as it’s potentially lucrative base of younger (read: Millennial) and more affluent shoppers. However, recent analysis of consumer data collected by Prosper Insights & Analytics suggests that Walmart.com is struggling with deeper, core customer issues that the Jet.com buyout isn’t likely to fix.
Let’s begin with the basics to get a better viewpoint on where Walmart.com stands against archrival Amazon.com. According to Prosper’s E-Commerce Preference Index (a measure of a retailer’s most loyal e-commerce shoppers resulting from unaided, write-in questions posed to more than 6,000 U.S. adults on a quarterly basis), loyalty to Walmart.com has been flagging for years while shoppers have been carrying on a retail romance with Amazon. By the numbers, that amounts to a five year compound annual growth rate of +14.5% for our Amazon Index, while Walmart.com suffers a -2.0% CAGR. Ouch.
Where does Jet.com stand in all of this? The splashy, media-mega-bucks-spending newcomer hasn’t attracted enough loyal shoppers in the past year to register within our E-Commerce Index. However, among those who have shopped Jet.com in the past year, Amazon.com is their clear website preference for both apparel and non-apparel shopping, even outpacing the overall average. In contrast, Jet.com shoppers exhibit a slightly below-average preference for Walmart.com. For those keeping track, that’s double ouch for Wal-Mart.
However, here’s where Amazon has gone in for the kill: while Wal-Mart has been squawking about its $3.3 billion cure-all in the form of Jet.com, Amazon – led by that wily fox Jeff Bezos – has been raiding Walmart.com’s henhouse of core, lower income shoppers. Households earning under $35,000 have been Amazon’s fastest-growing income segment at a +15.2% CAGR over the past 5 years compared to Walmart.com’s -1.4% CAGR. Adding further insult, Amazon’s compound annual growth rate over the same period also reaches double-digit gains for middle and upper income consumers while Walmart.com faces declines across the board.
In short, Amazon has outplayed Wal-Mart at its own game, doing so with more style than the Bentonville “behemoth.” Combining low prices with fast and free shipping and excellent customer service proved to be a winner among consumers of all income levels for Amazon – redefining the term “shopping experience” for a new age of retail. Meanwhile, Wal-Mart throttled itself by underestimating the Amazon threat as well as e-commerce shopping trends and preferences as a whole. These major missteps are now forcing Wal-Mart to play catch-up by Bezos’ rules – answering Amazon Prime with the two-day ShippingPass membership program (which still operates in a noncommittal “pilot” phase) and spending big on Jet.com’s technology and its burgeoning, not-yet-loyal shopper base. Granted, Jet.com’s tech prowess is likely to be a boon to the discounter if successfully integrated into its e-commerce platform. However, will that be enough to lure shoppers away from Amazon? With Bezos & Co. charging ahead in an era of retail disruption, Wal-Mart will likely continue to play follow the leader.
Pam Goodfellow is Principal Analyst/Consumer Insights Director for Prosper Insights & Analytics™ and editor of the monthly Consumer Snapshot.