Investors of Amazon.com, Inc. (NASDAQ:AMZN) are not worried about Wal-Mart Stores Inc (NYSE:WMT)’s strong growth of e-commerce sales in the fourth quarter if the trading is any indication. However, the reality is quite different. The online sales showing could be viewed as a rebirth for the world’s biggest retailer. As a result, online shopping could witness fierce competitive conditions in the upcoming months.
There are few things that should worry Amazon.com about the growth of Wal-Mart in the immediate, as well as, long term. The chain of retailer gained its prominence in online shopping after the acquisition of Jet.com in September last year. Of course, mere acquisition will not enable the acquirer to reap benefits. The most key factor is that Jet CEO was trained by none other than Jeff Bezos.
According to a report in thestreet.com, DigitalMarketing.com, an online marketing agency, CEO Eric Schiffer believes that Amazon allowing Marc Lore, who founded Jet.com and Quidsi, to leave the organization is a big blunder that is costing the company. Incidentally, Quidsi was acquired by Amazon for $550 million in 2010. As a result, Lore was with the online retailer for about two years.
Schiffer thinks that Wal-Mart could eventually topple Amazon as the biggest online shopping firm in the globe. This might sound a bit highly optimistic considering that Wal-Mart has reported revenue of $3.3 billion only in the holiday-season dominated fourth quarter though it achieved 29 percent year-over-year growth.
On the other hand, Amazon delivered 22 percent year-over-year growth to reach $43.7 billion in the fourth quarter. Excluding adjustments, its net sales would have grown 24 percent. Most importantly, growth came on bigger comparison than Wal-Mart’s.
However, the biggest worry should be the distribution. Currently, the biggest retailer is giving run for money to online shopping leader. For instance, Wal-Mart launched two-day shipping service last month without any membership fees for free to attract more shoppers. Similarly, there are differences between prime membership and ShippingPass. With more than 6,000 stores in the United States, Wal-Mart has the wherewithal to launch even same-hour home delivery. That would put a lot of headache on Amazon’s same day delivery service.
In a nutshell, though the online retailer has different business units like Amazon Music or Amazon Web Services to offset any weakness, it could not take lightly the growth of Wal-Mart’s e-commerce business. In any case, a tough competitive environment is emerging for online retailers.