Recently Walmart acquired Jet.com, an ecommerce company, for $3.3B. Walmart is trying from fifteen years to beat Amazon in eCommerce game. However, Walmart has no luck so far. On the other hand, Amazon has become eight hundred pound eCommerce guerilla and, looks like, it is un-stoppable.
Jet brings experienced eCommerce leadership, technical talent, and logistics and distribution expertise. However, there are many differences between Amazon and Walmart that makes it difficult for Walmart to win the race.
Digital Native –Key technologies require to run an eCommerce business are web/mobile user interface, data and analytics, and advanced algorithms for supply chain, logistics, and distribution. Amazon has nearly perfected in each of these areas over past twenty years. They have digital DNA that enables them to innovate new technologies and keep competition at the bay. On the other hand, Walmart is a brick and mortal store and its technologies are far behind as compared to Amazon. Legacy technologies does not allow them compete effectively.
Technology provides significant competitive advantage for an eCommerce business. However, Walmart’s core is not build around technology. There is very little emphasis on innovating new technologies that can solve Walmart specific problem. It buys new technology from third party vendors and it is not necessary that vendors are innovating new technologies to solve Walmart specific problems. Furthermore, if a technology is available for Walmart, it will be available for its competitors also. Hence, Walmart does not have any competitive advantage. This is where Jet.com can help Walmart to upgrade its technologies and could create competitive advantage. If Jet’s technology team stick around, they can provide big boost.
Culture – Amazon is a technology company and most technology companies have entrepreneurial culture. Entrepreneurial culture promotes agility, nimbleness, ability to take risk, and fail fast. On the other hand, traditional brick and mortal retailers are process heavy, employees are not encouraged to take risk, longer decision making cycle time, and incentives are designed to meet pre-defined GOALS. It makes very difficult for Walmart to compete with fast paced eCommerce competitors. Even with Jet, it will be very difficult for Walmart to change the culture.
One potential solution could be Walmart should merge current eCommerce business with Jet.com and create a separate entity. The new entity should have incentives and process that enable entrepreneurial culture. Furthermore, it should not have shadow of Walmart’s brick and mortal side of culture.
People – Two sectors that attract best and brightest are Technology and Finance. Technology companies provide great financial rewards to their employees, ability to work on state of the art technologies, and they are surrounded by smart colleagues. It enable them to challenge each other intellectually that foster innovation. Amazon is able to attract best and brightest and has setup very high bar for its employee to enable customer experience. However, same is not true for Walmart. It is still a traditional retail store where focus is more on business processes rather than on people. Jet can help Walmart to bridge some of the gaps if its employee stick around long enough.
If Walmart can deeply integrate Jet.com, it will be huge win. However, history tells us that it will not be an easy task. Walmart management need to think and act differently to pull it together.