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This Week In Amazon Vs. Walmart: The Battle For Consumers

Retailers fight for consumers

Though Amazon and Walmart are in a constant race for the consumer’s whole paycheck, they mostly stay within their own lanes.  Though both move and counter-move against each other in clearly observable and trackable ways — the instances of the two firms directly pushing on or back against each other are comparatively rare.

This week, however, it seems such direct push-and-pushback is happening as both sides look to shore up the strength of their various marketplaces. It was a week with a fair amount of push back on the road, particularly on Amazon’s side of the ledger with choppy waters in both its delivery operations and ongoing expansion into healthcare.

But the week also saw pushes forward with Walmart ongoing its efforts to refine its eCommerce operations; and Amazon’s continuing experiments in outside-the-box thinking about bringing things to people — and people to its platform.

Amazon

Big Expansions Of The Week:  Moving On Students And Moving Forward With Robots 

It was a big week for advances in robotic deliveries, with Postmates securing the first permit to test robotic sidewalk deliveries in San Francisco.

Amazon followed on the week’s second big robotized delivery news with the announcement that its delivery robot Scout had begun deliveries in Irvine, California. Scout saw its first tests in Amazon’s Seattle backyard — and company officials predict California will prove an easier testing ground with it sunnier and milder weather.

“Over the last few months, Amazon Scout has delivered thousands of smiles to customers just outside of Amazon’s headquarters in Washington state. All the while, the devices have safely and autonomously navigated the many obstacles you find in residential neighborhoods — trash cans, skateboards, lawn chairs, the occasional snow blower and more,” the company said in a blog post.

Amazon also noted Scout is beloved of local pets — particularly a cat named Winter and an “excitable Irish terrier” named Mickey.

Amazon noted that testing would remain small scale and in a limited number of neighborhoods at first — and only during daylight hours between Monday and Friday. Customers will not be able to choose robotic delivery during testing — robotic delivery will choose them. Amazon did note that when Scout shows up, it is mostly a pleasant surprise and has been popular with consumers.

“In the span of a week, our ambassadors witnessed a child ask her dad for a Scout for Christmas, and another customer ask if he could hitch his two dachshunds to Scout and use it as a dog walker,” the company noted in its blog post.

The acceptance of the bots may be abetted by the fact that they have not been quite let loose to roam free — they are accompanied by an Amazon Scout Ambassador that, among other things, tracks consumer reactions and answers questions. The long term goal, of course, isn’t just a handful of highly supervised bots in select settings, but for bots to become common parts of the consumer landscape unobtrusively buzzing by, solving those pesky last-mile delivery issues.

“We’re still in field test mode, and our expansion to the Irvine area is just another in the many steps forward for this new delivery system,” Amazon said. “The future is right around the corner, and we couldn’t be more excited.”

Speaking of exciting advances — and embracing the future, Amazon is looking to push its often overlooked music streaming service by cutting the price for college students.

Students with an Amazon Prime subscription can now get Amazon Music for just 99 cents a month, down from a previous student price of $4.99.  The base price for Amazon’s Prime student membership is $6.49 per month. Apple and Spotify both charge students $4.99 a month.

All Prime Members have access to Prime Music, and for an additional $7.99 a month they can subscribe to Music Unlimited — the service college students now pay $0.99 a month for. Though Amazon does not release specific figures for its music service, its subscriber base far trail’s Spotify’s 26 million or Apple’s paid subscriber base of 28 million.

Will cutting the cost for students be enough to catch Apple or Spotify? Probably not. But will it give younger users a reason to sing on with Prime earlier and one more reason to interact with it more often? Well, it’s not a bad way to start making an early claim on that whole paycheck, $0.99 at a time.

Choppy Sailing Of The Week:  More PillPack Pushback And FedEx Says Good-Bye 

The tension between Amazon-owned PillPack and CVS-owned Surescripts has been rising for a while now  — ever since Surescripts informed PillPack it would no longer be able to obtain prescription data through a third-party source, ReMyHealth. Surescripts manages 80 percent of all U.S. prescriptions — so losing access to their data would be catastrophic for PillPack — such that Amazon has threatened to sue for access to the data.

Surescripts has said in the past that its reasons for withholding this data are out of concerns for patient privacy; as prescription data can reveal a lot about an individual’s health status.

This week, Surescripts is accusing PillPack of gaining illicit access to patient data that it is not entitled to from  ReMyHealth to get the medication histories from customers.

Surescripts, in a public statement, noted that it has barred ReMyHealth from sharing this data, and went on to note that it has referred the issue to the Federal Bureau of Investigation (FBI).

The prescription drug market is worth about $424 billion, many legacy companies in the industry act as gatekeepers and it’s difficult for newcomers to break in without access to the information they control.

“The competitive backdrop is Amazon trying to get into this market and you’re seeing points of pressure from the incumbents who don’t want to make it any easier,” said Michael Newshel, an Evercore ISI analyst.

PillPack’s service offers packaged medications separated and labeled by day and time, to help customers who take many medications (and have trouble remembering days and dosages) simplify the process. To perform that process correctly, they need complete prescription data, according to PillPack spokeswoman Jacquelyn Miller.

“The core question is whether Surescripts will allow customers to share their medication history with pharmacies and if not, why not?” Miller said.

Surescripts says it never authorized access for PillPack.

ReMyHealth has responded to Surescripts claim — and said the company’s decision seems to be financially motivated as opposed to being based on any factual finding.

“Surescripts’s claims are unfounded, false and appear to be part of their overall market strategy,” a ReMyHealth spokesperson said.

And the ongoing PillPack drama wasn’t the only rocky sailing of the week.

After ending announcing the end of its express U.S. shipping contract with Amazon earlier this summer, FedEx followed up this week with news that it is ending its ground-delivery contract with Amazon and will not renew it.

“This change is consistent with our strategy to focus on the broader eCommerce market, which the recent announcements related to our FedEx Ground network have us positioned extraordinarily well to do,” a spokesperson for FedEx said.

Amazon was not available immediately for comment.

The move was not exactly unexpected as Amazon has increasing acted to grow its internal delivery network and technology footprint.  In June it rolled out both its Delivery Service Partners program and delivery drone the same month, with hopes of eventually speeding up delivery for North America Prime members. Earlier, this year the eCommerce giant announced plans to open up a $1.5 billion hub in 2021 in northern Kentucky as a base of operations for its 50 aircraft Amazon Air fleet.

FedEx noted in its statement on ending the Amazon contract that as of 2018 Amazon made up under 1.3 percent of company revenue in the last year and that its posture has become increasingly competitive.

And speaking of competitive postures:

Walmart 

Big Scuffle Of The Week: Playing Hardball For Marketplace Sellers 

Merchants who cross-list their goods on both Amazon and Walmart’s marketplaces are complaining this week that Amazon is starting to crack down a bit.

The issue, in particular, arises when the sellers in question are offering a lower price on the Walmart marketplace than that Amazon’s — which Amazon’s reportedly finds through scanning software. When it is found, Amazon alerts the seller to the discrepancy and then downgrades the item in product search results until the rates are evened out.

The policy isn’t new — it has been drawing complaints since 2017 — but according to antitrust experts,  the policy is far more likely to come under regulatory scrutiny in the current political environment.

“Monopolization charges are always about business conduct that causes harm in a market,” said Jennifer Rie, an analyst at Bloomberg Intelligence who specializes in antitrust litigation. “It could end up being considered illegal conduct because people who prefer to shop on Walmart end up having to pay a higher price.”

Merchants have complained that this — along with having to pay for advertising to stand out on the platform means that it costs a fair amount to try and make money on Amazon. Walmart, at present, charges lower fees to sell and is seen as an attractive additional listing site for an Amazon seller, but not at the expense of sales on Amazon.

Michael Kades, a former FTC attorney who now researches antitrust issues at the Washington Center for Equitable Growth, said Amazon’s price alerts are sure to be scrutinized.

“If regulators can prove that this conduct is causing merchants to raise prices on other platforms,” he said, “Amazon loses the argument that their policies are all about giving everyone lower prices.”

Amazon has pushed back, noting through a spokesperson that “sellers have full control of their own prices both on and off Amazon, and we help them maximize their sales in our store by providing them insights on how to be the featured offer.”

And Amazon playing hardball in the marketplace was not Walmart’s only online woe this week.  It seems ModCloth is moving closer to a sale, as Walmart looks to hone its eCommerce strategy.

Impending Sign-Offs: Walmart Moves Closer To Unloading ModCloth 

When Walmart acquired vintage-inspired digital apparel retailer ModCloth in 2017 for between $50 million and $75 million, it was on something of a digital buying spree. Fresh of its massive $3 billion acquisition of Jet.com, Walmart purchased ModCloth, Moosejaw and Bonobos in rapid succession as it attempted to update and expand its digital brand.

But, it seems, that these days that strategy is getting some pruning — and ModCloth may soon be up for sale as reports indicate this week that Walmart is strongly considering selling off ModCloth.

“I can confirm that Walmart has received outside interest from buyers for ModCloth,” Silvia Mazzucchelli, Modcloth’s CEO, told Glossy. “We are in the process of exploring potential opportunities.”

ModCloth was something of an odd fit at Walmart, and longtime brand fans loudly complained about the acquisition and threatened to boycott the once-beloved site. To date, the firm has not turned a profit and has been through three separate CEOs since 2018.

The most recent CEO Siliva Mazzucchelli has offered no further details on potential sale partners — only noting that for now the brand is focused on its strategy for the immediate future.

“At the moment, we don’t have plans to expand and open new stores this year, because we are still tweaking and experimenting with the formula in the stores we currently have,” said Mazzucchelli.

The news about ModCloth comes as Walmart’s eCommerce division is expanding — but at not at small cost; the eCommerce division is projecting losses of $1 billion in its bid to catch up with Amazon, a fact which is causing tensions between the leader of the division and Walmart U.S. CEO Greg Foran according to media reports.  There have also been several months of reports that Walmart has been reshuffling its internal organizations to better support the switch to a more fully omnicommerce retail experience.

And while for the time being Walmart is remaining behind at least some of its more expansive and outside the box eCommerce bets like Bonobos, it also seems to be more honing its focus on areas that are delivery more clear results among consumers and capturing a later share of their paycheck. That includes a particular focus on its digital grocery business — with goals of having expanded service to 3,100 of its U.S. stores by the end of 2019.

How it is doing on that effort so far?  The world will get its latest update next week, when Walmart releases in Q2 earnings and the latest round of updates are available and the world gets its next look on how well Walmart’s many expensive investments in expanding its eCommerce footprint are helping it catch up to Amazon in the race for the consumer’s whole paycheck.

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