I’m a little surprised to see this:
Wal-Mart, the mightiest retail giant in history, may have met its own worthy adversary: Amazon.com. In what is emerging as one of the main story lines of the 2009 post-recession shopping season, the two heavyweight retailers are waging an online price war that is spreading through product areas like books, movies, toys and electronics.
Used to be that every year, right around the hotel convention season, the Miami Herald would run an article about how the hotel industry was doomed and price wars were just around the corner. The New York Times would return the favor during Seatrade, offering some expose about tax shelters and shipboard rapes by undocumented crewmen. It’s a nice way to thank your advertisers.
That doesn’t seem to explain this article, and I can’t imagine what does. How does a $450bn company get worked up about a $20bn company that sells through an entirely different channel with at best tiny, tiny overlap?
Wal-Mart, at its core, is about push marketing. It may not have the limited SKU approach of a European hard discounter such as Aldi, but given a 160,000 square foot supercenter, there is surprisingly little choice within a category. There just happen to be a lot of categories.
Amazon, by contrast, is the long tail. Its growth has been horizontal; you can find ever-more obscure merchandise from its partner vendors, as well as the typical high-touch predictive book and video selling (side note: I have a tough time believing there is any complex algorithm to its recommendations; after buying hundreds of books over the past decade, my recommendations from Amazon are still some derivative of “as similar as possible to the last three books ordered”).
Why would Wal-Mart want to bother? The low value-to-weight stuff they sell isn’t going to be helpful for Amazon, unless Amazon wants to go the way of pets.com.
And there is no point in Wal-Mart replicating Amazon’s habit of stocking obscure movies; how many of its customers are likely to buy a movie outside of the top 100 sellers?
One of the odd lessons of the internet seems to be that the perfect place to cross-sell isn’t that perfect after all. Once upon a time, Microsoft had the leading email client. That was sticky, but it didn’t get its users to read MSN content; they went to Yahoo’s pages. Yahoo’s enormous user base didn’t stick with it for search; people with My Yahoo pages still searched with Google. Google’s dominance of search couldn’t even get people to use Google Video; they ended up buying YouTube just to prevent someone else from getting into search through the back door.
None of the portals has been able to sell stuff, and Amazon and eBay have struggled to build anything but transactional visits. Facebook and Twitter have tremendous numbers of visitors, but few do anything other than check up on their friends; they don’t use it as a base of consuming or doing anything else.
We have the feeling that the Internet should be disruptive, and of course in the sense that technologies emerge and recede it is. Just ask AOL or Alta Vista or Friendster. Someday there will be a better way to look for what you want and “Google” will be the answer to a Silicon Valley trivia question.
The tendency to compartmentalize, however, seems if anything to be greater. And it only grows with a mobile web. One of the things that surprised me the most about switching to the iPhone (other than the fact I was able to type without buttons) was the proliferation of applications that essentially replace the typical hierarchical browser. It is an electronic Swiss Army knife.
No need for the corkscrew to fight with the scissors.