As the spending season gets into gear with Black Friday looming on the horizon, the action is getting more interesting in the Walmart-Amazon race for the consumer’s whole paycheck. The moves are getting broader (particularly on Amazon’s side) and deeper (particularly on Walmart’s side).
The question, in the final countdown to prime shopping time nationwide, is how much ground can be covered — and where the strategic hold points will ultimately shake out. Coming out of this week’s sprint, Amazon is looking a bit more sure-footed, while Walmart looks like it is at least anticipating some hurdles.
But, as we’ve seen throughout the fall 2019, the state of the race for the consumer’s whole paycheck has a way of reversing pretty quickly …
Big Play of the Week: Amazon Go Gets Bigger — And Smaller
When Amazon Go’s cashierless checkout technology came out, its ambitions were modest. The store, supported by the seamless payment tech, was essentially a high-end convenience store.
But it seems come early 2020, Amazon Go is taking its next great leap forward — into the grocery game.
According to reports, Amazon Go will be coming to a 10,400 square-foot grocery store in Seattle’s Capitol Hill neighborhood, where it is currently being tested. The technology is also slated to support a series of pop-up shops.
Amazon Go’s entry into the grocery arena has been underway for the last seven years or so, and cost Amazon over $1 billion to develop, according to unnamed sources. The technology for Go is built off of a complex array cameras and software that collaborate to “see” what a consumer takes from the shelf, and correctly charge them for those items they actually exit the store with. The Go team is now part of Physical Retail Technologies group within Amazon — an entity created in 2017 to expand the efficacy, efficiency and profitability of the tech such that it could be used more expansively — and sold to other retailers looking to adopt cashierless technology.
The pop-up kiosks currently planned are meant more as showcases of the current Amazon Go locations — but in miniature — and are intended for spaces like malls and sports stadiums.
“The big question isn’t will the tech work,” said Forrester Research’s Brendan Witcher of the announced expansion. “Amazon will make it work.”
Prime Power-Up of the Week: Amazon Music Goes Free (With Ads)
Bad news for the folks over at Spotify this week, as they saw their share price plummet on the news that Amazon had decided to offer a new variation of its Amazon Music streaming platform.
Previously Amazon’s free, ad-supported streaming service was available only to consumers who owned an Amazon Echo device; under the new instantiation the free version of Amazon Music will be available to anyone using the app on any device.
The move is the latest of many add-ons and expansions Amazon has made for its music streaming services. Earlier this year the firm dropped the $3.99 monthly fee for streaming Amazon Music Unlimited to Echo devices. The new free variation of the app offers users access to Amazon’s roughly 2 million song catalog. Prime members already have access to that catalog for free as part of their Prime benefits.
Whether the service as offered will really provide much in the way of competition to Apple or Spotify (the two leading services in the music streaming race) is unknown, but most experts think probably not, the hit taken by Spotify’s stock price on the announcement notwithstanding. Both Apple and Spotify have much, much larger song catalogs that Amazon offers. The goal, analysts note isn’t to steal market share from the leaders.
It is, however, an inducement to sign up for Prime — since all that highly-accessible music would be available ad-free (alongside all of Prime’s other perks). CEO Jeff Bezos said Amazon’s plan was to continue to improve Amazon until it would be “irresponsible” for a consumer not to sign up.
It seems safe to say that project remains ongoing.
Tech Trouble of the Week: Ring’s Ongoing Privacy Problem
Legislators are once again coming to call with questions this week — this time a group of five senators writing Amazon CEO Jeff Bezos looking for an explanation of how exactly video surveillance firm Ring (and Amazon property) makes use of user data and video footage.
Sens. Ron Wyden of Oregon, Chris Van Hollen of Maryland, Ed Markey of Massachusetts, Chris Coons of Delaware and Gary Peters of Michigan were co-signatories of a letter Wednesday (Nov. 20) with questions as to whether the footage could be accessed by foreign entities, or whether the technology posed a risk to national security.
“Personal data can be exploited by foreign intelligence services to amplify the impact of espionage and influence operations,” the letter said.
At present Amazon has confirmed that it is reviewing the letter and the issues contained within it. The company has also posted blog post it described how it works with authorities.
“Ring users place their trust in us to help protect their homes and communities, and we take that responsibility very seriously,” a spokesperson said. “Ring does not own or otherwise control users’ videos, and we intentionally designed the Neighbors Portal to ensure that users get to decide whether or not to voluntarily provide their videos to the police.”
Security concerns — specifically related to reports of hacked doorbells and foreign employees with broad access — are still being addressed by Amazon. They were of primary concern to the senators.
“These reports raise serious concerns about Ring’s internal cybersecurity and privacy safeguards, particularly if employees and contractors in foreign countries have access to American consumers’ data,” the senators wrote.
Big Play of the Week: The Produce Reset
The produce section remains the physical retailer’s fairly stable bastion of strength in the world where grocery sales are consistently trending increasingly digital; when it comes to produce 95 percent of consumers express a preference for shopping in store. In that light, Walmart’s announcement that it is revamping its entire produce department to make it more enticing to customers is not all that surprising. When racing with Amazon for the consumer’s whole paycheck, shoring up ones better defensive points is never bad idea.
Walmart, as has has been the trend among grocers, has been expanding its in-store selection of locally grown and organic foods, as well as making some incremental design changes to the department that holds them.
Though changes, it seems, are about to get bigger and bolder, with what Walmart is calling Produce 2.0.
The new design will focus on an “open market feel” that will incorporate low-profile displays meant to make it easier for customers to see the produce when they walk into the store.
In addition, the retailer will move all of its organic items into one area of the department, as well as widen the aisles and add more signs.
The renovation process has reportedly already started at more than 200 stores, and the company expects to complete it at most of its U.S. stores by next summer. Walmart has also lowered prices on its produce in recent years and worked to speed up its supply chain to extend how long fruits and vegetables can last on the shelves.
The move comes in the same week Walmart CEO Doug McMillon noted in an interview with CNN that change has to be part of the foundational formula at this point because it is what the market demands.
“Walmart is not arrogant,” McMillon said. “We could go away at any minute. I think most of us act that way every day. If you’re not willing to fail — and we are failing at some things — you’re going to go away.”
Retailers come and go, McMillon said in the interview, noting he keeps a photo on his phone that lists the top 10 retailers in the country over the last decade to keep himself motivated.
“It’s really simple: If you’re not meeting the wants and needs of the customer, you’re done. There’s not a lot of loyalty here,” he said. The loyalty is an outgrowth on delivering what consumers want, when and how they want it. Starting in 2020 anyway, with the produce section.
New Leadership of the Week: A New CEO For Sam’s
Walmart-owned Sam’s Club has a new CEO to replace former CEO John Furner who left earlier this month to replace departing Walmart U.S. CEO Greg Foran.
Going forward, Kathryn McLay will serve in the role of president and chief executive officer for Sam’s Club — Walmart’s $59 billion warehouse club division, which operates 599 club stores and 572 pharmacies in the U.S. and Puerto Rico.
McLay has been with Walmart since 2015 as VP of finance, SVP of supply chain and EVP of neighborhood markets, where she led the growth and overall operations of nearly 700 Neighborhood Markets across the U.S.
Sam’s Club reported revenues of $59 billion in 2018, with 100,000 associates and almost 600 clubs. According to financial statements released on Nov. 14, Walmart beat Wall Street forecasts from August through October.
Profits also topped analysts’ predictions, at $3.29 billion over the anticipated $3.1 billion. A Refinitiv survey indicated that adjusted earnings came in at $1.16, more than the forecast $1.09 average.
“Kath has a track record of success in every role she has taken on. Her ability to deliver results today, develop a vision for the future and lead the change necessary to achieve it is compelling. She is curious and courageous,” said Walmart CEO Doug McMillon.
Unintended Consequence of the Week: The Battle With the Dogs
One might look at the above subheading and wonder what possible battle the nation’s large retail chain could possibly be getting into with dogs — and how on earth it could possibly affect the race for the consumer’s whole paycheck. Don’t feel bad, Walmart clearly did not make the connection either.
A few weeks ago Walmart announced it would soon be delivering groceries not just to consumers’ front doorsteps but inside their actual homes as well — a $19.95 a month option that Walmart has said it intends to scale aggressively. The problem, according to CEO McMillon, is that behind some of those closed doors are dogs. Dogs of all sizes who are often perturbed by the appearance of a delivery person arriving unannounced and prone to making their displeasure felt.
“We have this place on the app where customers can tell us whether they have a dog or not,” McMillon told CNBC’s Becky Quick from the network’s Evolve Summit in Los Angeles this week. “And sometimes they misinform us about whether the dog is in the house, or not in the house.”
So far, he said, the worst consequence has been an inconvenience for the delivery driver and the customer when a delivery has to be halted until the dog’s owner can “resolve the situation.” McMillon believes the situation will settle as people get more used to delivery people entering their homes.
Given the amount of time and treasure Walmart has invested in expanding and perfecting home grocery delivery — and the rewards it has started to reap in stock price (up 28 percent in 2019 so far) — we think it is fairly safe to believe it won’t let the program go to the dogs, figuratively or literally.
And it looks like bad puns is where we’ll leave it this week — with our sincerest apologies of course — as we gear up for next week when the biggest race weekend for the consumer’s whole paycheck (and then some) goes into high gear the minute people start putting down their forks at the Thanksgiving table.
We’ll make sure to keep you posted on how the state of the race plays out during 2019’s championship weekend.