Former Walmart CEO Bill Simon thinks that Walmart’s big brick-and-mortar network of stores gives it an underrated edge against Amazon in a multichannel world where consumers want smooth online-to-offline commerce experiences.
Talking to CNBC Thursday, Simon noted that, while Walmart has its work cut out for it, he believes it goes into the competition with an advantage.
“The question and the challenge for Walmart is, can [it] redefine [its] play into more of an omnichannel play than Amazon? Because that’s an advantage for [it],” Simon said to CNBC.
Wall Street was surprised by Walmart’s results this week, with same-store sales hitting a rather unanticipated 10-year high in Q2, show that its major investments in eCommerce, supply chain management and product offerings were successful in bringing consumers to stores and to the web, as well as getting them to build larger and more expensive baskets.
There were some gray spots in the report — sales and earnings are up, but Walmart’s profit margin is down as it is pushing lower prices and expensive infrastructure redesigns.
“Forty percent eCommerce growth is one of the reasons [Walmart is] struggling a little bit with operating income, because eCommerce is not as profitable as the brick-and-mortar businesses,” Simon said.
But, having those brick-and-mortar stores is where Walmart has an arsenal its internet-based rivals do not.
“I am encouraged by the grocery results that Walmart was able to put up this quarter. It’s because [it has] done a lot of hard work in their fresh areas, and fresh is very difficult to compete with online,” Simon said. “As Amazon starts to make traction in the grocery piece in the U.S., they are going to have to struggle with that.”
Gerald Storch, former CEO of Hudson’s Bay and Toys R Us, agreed, noting that Walmart is especially well positioned to fight for dominance in an omnicommerce powered future.
“Everyone is not shopping on the internet, and they never will, so they came to Walmart stores in droves,” Storch said.
Amazon and Walmart may be each other’s biggest competitors, but, according to Storch, they aren’t playing a zero sum game — in fact both are winning by using different business models to attract consumers.
“There will be two big winners on the internet: Amazon and Walmart. Everybody else better be playing with one of them if they want to be around 20 years from now,” Storch said.