Written Analysis and Communication

Project A

Walmart vs. Amazon (Physical vs. E-retail)

By

PGDM B17 / 055 – GokulnathK SPGDM B17 / 074 –MohitLalchandani

PGDM B17 / 081 –MilanAgrawalPGDM B17 / 128 –ShreyaKhanna

PGDM B17 / 160 –VijayashreePGDM B17 / 162 –Vishnu Raam S

WAC Project A Group 10

Walmart vs. Amazon

Introduction

This report shows a comparative analysis between Walmart and Amazon.

Amazon

It started as an online bookstore and later diversified to sell DVDs, software, electronics, apparel, furniture etc. and is the largest Internet-based retailer in the world today.

Key elements of Amazon’s Business model(E- Commerce model)

Supply Chain Management

It starts with the customer placing an order. The order prompts a red light to come on in the warehouse which shows the worker the products that have been ordered, and the bar code is matched with the order. The product is then placed in crates on a conveyor, which goes through the distribution centre before being sorted by bar codes. Crates arrive at the central point, and bar codes of products are matched with orders and sorted automatically into one of several thousand chutes before going into a box. The bar code then identifies the customer order, boxes are packed taped and weighed, and they are shipped by either US postal service or UPS for the last mile, arriving at the consumer within 1 to 7 days.Amazon’s warehouses are divided into 5 storage areas:

WAC Project A Group 10

Library Prime

(Books & magazine)

Case Flow Prime

(High demand Broken case)

Pallet Prime(High Demand

Full case)

Random(Smaller items with modern

demand)

Reserve(Low demand,

irregular shaped products)

Strategies

What walmart did to customer’s wallets, Amazon is doing to their time. Competes not only on price and range, but also on convenience. Mission is to become EARTH’S

MOST CUSTOMER CENTRIC COMPANY – standard bearer as obsessive focus on customer rather than an obsessive focus on competitors.

“PRIME PANTRY” – Deliver a box of household goods for a flat shipping fee of $5.99, as well as free day shipping or home delivery within 2 hours.

“AMAZON DASH” – Lets consumer hit a button placed where ever they like, to buy common items, eliminating the hassles of visiting Amazon’s website or app.

Consumers can also use a pie of technology to scan and order items already in their cupboard. Anticipatory shipping feature – Use order histories to predict what a customer will need, and

then ship to nearby warehouses and hubs before they even purchase the item Amazon has not reported profits in 20 years since inception. While the revenue has increased a

lot over the years. It is Aiming for long term profits and continues to reinvest for a much larger scale of business.

Trading present for the future. Spending all its revenue to invest in warehouses and lowering its shipping cost and increasing the speed of shipping items.

Analysis

Amazon was able to successfully convert B2C to a mixed model which also focuses on business buyers. Amazon allows merchants to list their products and customers to purchase using amazon ecommerce platform. But selling the goods is not only way to make money with amazon. Through amazon’s affiliate program anyone can post a link to amazon and earn some money.Amazon Web Service lets developers access the amazon technology infrastructure to build their own applications for their own websites. All product sales by those websites have to go through amazon.com and the associate gets commission.

Walmart

It is an American multinational retail corporation that operates a chain of hypermarkets, discount department stores and grocery stores and is the world's largest company by revenue today.

Key elements of Walmart’s Business model (Brick and mortar model)

WAC Project A Group 10

Supply Chain Management

Purchasing:Walmart’s purchasing managers who determine which products will sell, find vendors and arrange deals for the products. Walmart employs Vendor Managed Inventory to get certain information from the buyers of the product and thus, takes responsibility in maintaining the inventory of the material.

Operations:Walmart employs Cross Docking where the goods are loaded and unloaded from one truck to other without any intermediate storage or space. The Operations portion of a supply chain focuses on demand planning, forecasting and inventory management. Forecasts estimate consumer demand for a product based on historical data, external drivers such as sales and promotions and changes in trends or competition.Demand planning is used to create accurate forecasts, a critical step toward effective inventory management. Forecasts are compared to inventory levels to ensure warehouses have enough, but not too much, inventory to meet demand.

Distribution and Integration:Moving the product from warehouses or manufacturing plants to stores and ultimately to customers is the distribution function of the supply chain.For Walmart, its SCM methods yield lower costs for products and inventory, better control over selection in its stores and the ultimate result of lower prices that can be passed to customers.

Strategies

WAC Project A Group 10

PurchasingOperations Distribution Integration

Building an OMNICHANNEL MODEL – to be in constant touch with consumer and provide valuable customer experience. Aims at building seamless integration between digital and physical shopping.

Invested $1 billion in e-commerce and $10.5 billion in IT. These investments have decreased profits but the firm is banking on long term growth.

Making its operations more expansive and efficient by combining its growing number of physical assets with a growing e-commerce platform and array of new digital and analytical tools.

Built new technological platform with new look, new ways to manage customer payments and analyses data.

Shutting down “express” shops (small convenience stores). Open 60 supercenters and 95 groceries’ stores in 2016. Also, adding another 10 meter square feet space in stores.

Spending $2.7 billion to raise worker’s wages. Raised minimum wage to $10 – this should improve services in the shop.

Staff armed with hand held devices with apps to simplify common tasks, like managing inventory Groceries account for more than half of its revenue in America. This segment will give tough

competition to Amazon as food is hard to sell online due to low margins and complex logistics. Working on a PICK-UP service for delivering groceries – online shoppers’ park in special bays and

their walmart app signals their arrival. Staffs roll out crates of groceries, load them into waiting vehicles.

Acquired Jet.com, a shopping website, which will help them attract millennials. It has a real time pricing algorithm, which tempts customers with lower prices if they add more

items to their basket. The algorithm also identifies which of the Jet.com’s vendors are closest to the customer, helping

to minimize shipping costs and allowing them to offer discounts Entered into a strategic alliance with JD.com in China to give a tough competition to

Alibababa.com Acquiring a minor stake of($75 million to $1.25 billion) in Flipkart.com in India to give a tough

competition to Amazon.com

Analysis

Walmart’s traditional business model has included an e-commerce element to it. The success story of E- commerce and B2B implementation has caused the dominance of Walmart in the North American market. This rise in such a short span was due to harnessing the strength of E-commerce, E-procurement and adjustment to the internal process to maximize the advantage.

Walmart used a Pull strategy where customer demand drives suppliers. Decentralization of business decision of procurement to frontline allows staff to order the products electronically immediately. This rapid replenishment system, coupled with accurate forecasting helps Walmart to reduce cost.

Company Name

WAC Project A Group 10

Employees 2.2 Million 268,900Shareholders 250,000 2,744Market Cap $219.79 Billion $397.10 BillionRevenue $482.13 Billion $107 BillionNet Income $14.694 Billion $596 MillionDividend 1.99 N/AShare Price $72.12 $837.31Slogan Save Money, Live Better Work hard, have fun, make

historyHeadquarters (U.S.) Bentonville, Arkansas Seattle, Washington, U.S

Conclusion

Though Walmart is moving towards brick and click model . Amazon has a cost advantage over Walmart.Walmart has to implement and execute feasible strategies to give a tough fight to Amazon .However there is a need for Amazon to offer a simplified shopping experience. Walmart’s core business model of mass retail stores provides this simplified and shopping experience to the customers.Also, Amazon cannot continue with its strategy of earning profits in the long run . It has to deliver profits to its shareholders Else they might lose their trust in the company.

References:

https://channels.theinnovationenterprise.com/articles/amazon-s-supply-chain-processhttps://www.tradegecko.com/blog/incredibly-successful-supply-chain-management-walmarthttp://www.usanfranonline.com/resources/supply-chain-management/walmart-keys-to-successful-supply-chain-management/#

WAC Project A Group 10

WAC Project A Group 10