Amazon is currently king of the hill, but will it face contention from two old rivals?
For decades now Amazon has dominated the e-commerce space and the cloud in the US market. “Amazon doesn’t worry about anything that anybody else does, ever,” said Jon Reily, an e-commerce strategist at Publicis Sapient. “Amazon doesn’t look quarter to quarter or year to year – they do what they are going to do.”
It may seem that Amazon has nothing to worry about, but strong second-quarter earnings results from two of their old retail rivals may give Amazon cause to start looking over its back.
The Competition Continues
The two rivals are no other than Target and Walmart, who are quickly catching up in terms of updating their services to cater to the modern shopper. Their goal, to offer a seamless experience both online and in their thousands of physical stores, in order to drive strong sales and profits.
On Wednesday, Target reported second quarter adjusted earnings of $1.82 a share which soundly beat forecasts of $1.62 a share. Their physical store sales also rose 3.4% ahead of estimates of 3% growth. Target attributed half of this growth to their order pick up, drive up and Shipt services. Online sales also surged 34% during the same quarter.
Target has been stepping up their game, remodeling hundreds of their stores and expanding their grocery departments. This results in increased foot traffic, which takes away from online shopping on Amazon.
In a conference all with analysts, Target CEO Brian Cornell said, “We are seeing our Target guests visit us more frequently, shop more categories. They are enjoying the changes we have made in the store experience, but they are also taking advantage of the convenient fulfillment options that we are offering.”
If Wednesday’s results are anything to go by, Target will be on schedule to see its adjusted earnings exceed current expectations of $1.16 per share to $1.24 per share.
Walmart also saw substantial growth this quarter.
Their earnings exceeded forecasts by $0.05 per share, as well as increasing in-store sales by 2.8%. Their online sales surge was much more impressive, registering an increase of 37% at Walmart US and 35% at Sam’s Club.
Walmart CEO Doug McMillon believes that the company is well positioned to use their vast network of supercenters to deliver an omni-channel experience for their clients.
“More than ever, we’re innovating across the business. We’re experimenting with emerging technologies to improve store operations and reduce friction in our customers’ lives,” McMillon said. “The initiatives we have underway provide extended access to our brand and position the company to earn a greater share of our customer’s wallet over time.
The Future of Retail
The pool of online shoppers is immense, and provided that retailers offer the stuff that people want they stand to profit. The internet stands to be a goldmine for retailers for years to come.
What is happening at Target and Walmart are two well-capitalized companies with the best organizational talent they’ve had in years. Their talent is moving quickly to leverage their respective companies to get products and services to consumers faster than ever. They are anticipating the future of shopping, instead of playing catch-up to Amazon like they have done for decades.
Their past reactionary mistakes as well as the smartphone allowed Amazon to take root. Now it’s time for Amazon to realize that Target and Walmart are rising legitimate threats with strategically placed stores and the talent to match. They need to get serious about opening physical brick-and-mortar stores offering more services and also clean up their cluttered website if not their competition will quickly close the gap.
