AMZN vs WMT Weekly: Let the Markdowns Begin

First came weak retail sales for the month of May that simply confirmed the changing mindset and economic climate that consumers had already lived — and knew — all too well.  

Next came the sharpest interest rate hike by the Federal Reserve in nearly 30 years, which did little more than prove that the central bank was actually worried that inflation — now up to 8.6% — was getting out of control.

Taken together, these separate but related dilemmas perfectly framed the backdrop that Amazon, Walmart and every other chain store, eCommerce site and mom and pop shop in the country are currently contending with. 

In short, too much of the wrong stuff piling up in inventory, not enough of the right stuff to fill holes on shelves, and customers who are getting more and more weary by the day as they pour hundreds of extra dollars into their gas tanks.

Clearly, it’s a scenario no right-minded merchant would ever choose to be in, let alone the soft-landing most had hoped would await them after enduring two long years of pandemic-led disruption, which leaves few other options than to push through the turmoil, enact “Plan B” so to speak, and have a great big sale.

Prime Day Bumped Back to July

After being postponed till October in 2020, then reeled-in to late June last year, Amazon announced this week that its annual Prime Day event would return to its traditional spot on the calendar and take place July 12 and 13 this year. However, if bargain-starved don’t feel like waiting, Amazon said “early deals and member-only offerings” will actually begin next week, on June 21.  

So, not only is Prime “Day” going to last three weeks this year, but it will also straddle Q2 and Q3 in terms of its earnings impact.  

Nonetheless, it took less than a day for the first clone sale to be announced, this time by Target, which positioned its own Deal Days event to run from July 11 to 13. If history is any guide, scores of other retailers, including Walmart and its “Deals for Days” version, will soon follow suit.

While everyone loves a good deal, there are a few problems that these special sales events will likely face this year, not only as a result of economic weakness and inflation-fueled fear that has weary consumers pulling back, but also from the fact that right now there are so many sales going on that it’s often hard to tell.

Walmart’s Deals page, for example, is a permanent and prominent feature on its website, and has now recently been given a “Sizzling Summer Savings” upgrade that reflects both the season and the retailer’s promise to rectify its botched earnings performance that it reported a month ago.

“We’re not happy with the profit performance for the quarter, and we’ve taken action, especially in the latter part of the quarter, on cost negotiations, staffing levels and pricing while also managing our price gaps,“ Walmart CEO Doug McMillon told investors on the Q1 call May 17.

However, as many retailers join the mid-summer fun, consumers are sure to be seeing lots of deals online and in-store in the coming days and weeks, as an expected uptick in the river of markdowns appears to have begun.

Drone Wars

At a time when alternatives to using gasoline to drive to the store make more economic sense than ever, Amazon announced this week that it was bringing a drone delivery pilot program “later this year” to Lockeford, California, a rural community 90 miles west of San Francisco that’s home to about 3,500 people.

The news of the limited launch and testing scheme came just three weeks after rival Walmart announced that its partnership with DroneUp would be expanding to 4 million people in six states and was looking to complete 1 million aerial deliveries by the end of the year.

While Walmart’s drone program appears to be flying circles around Amazon’s at the moment, the eCommerce leader, which has been pursuing drone tech for a decade, insisted its experimental system was different.

“The promise of drone delivery has often felt like science fiction,” Amazon said in a blog that credited hundreds of scientists, engineers, aerospace professionals, and futurists for the advances made to date and those to come as the program expands.

“Not all drone systems are equal,” Amazon stated. “We’re building something different,” the company stated, before highlighting the “sense-and-avoid system” its aircraft will use to enable them to fly further and also avoid collisions with other aircraft, people, pets and obstacles.

Supercenter of the Future

Whether it’s equipping rooftops to handle drone traffic, reconfiguring parking lots to accommodate better traffic flow for increased curbside pickup or improving the digital integration of store and website, physical retail locations everywhere are undergoing a major rethink at the moment, and Walmart is the latest to jump in.

In announcing plans for what’s projected to be the first of 30 revamped locations this year, Walmart said it was planning to add more high-end apparel, furniture and brand partnerships, such as its recent tie-up with Gap Home or its new collaboration with of country music singer Miranda Lambert.  

In each case, the operator or 4,700 domestic stores is looking to expand margins and grow traffic in-store and online by selling higher-priced and more stylish merchandise.