Earlier this spring, Amazon and Walmart released investor updates within one day of each other that presented an interesting juxtaposition of how the two companies approach innovation: The long and short of it is that Amazon is a “Why” company, while Walmart is an “And” company.
Walmart CEO Doug McMillon in an April 9 update following the company’s investment community meeting: “We’re an ‘and’ company. We’re people and tech; stores and ecommerce; innovation and execution.”
Amazon CEO Andy Jassy in an April 10 letter to shareholders: “Amazon is a ‘why’ company. We ask why, and why not, constantly. It helps us deconstruct problems, get to root causes, understand blockers and unlock doors that might have previously seemed impenetrable. Amazon has an unusually high quotient of this WhyQ (let’s call it “YQ”), and it frames the way we think about everything that we do.”
The saga of Amazon and Walmart is more of a Godzilla v. King Kong tale than a David and Goliath story (although that certainly wasn’t the case 30 years ago when Amazon debuted as an online bookstore). And while Walmart still holds the crown as the world’s largest retailer in terms of revenue, over the last three decades Amazon has given Walmart a real run for its money, and as a result, prompted a notable series of innovations at the older company (Walmart Marketplace, Walmart Connect, Walmart Fulfillment Services, to name just a few).
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But perhaps even more interesting in this ongoing battle of the giants is the fact that, over the course their own histories, both Amazon and Walmart have represented a distinct disruptive threat to the retail status quo. So, we decided to dissect the two companies’ respective approaches to ongoing innovation, prompted by the fact that they have each chosen a simple three-letter word to define their strategy.
The is the first in a two-part series exploring the different innovation approaches of the world’s two largest retailers. Part Two, coming Thursday, will continue to explore the dynamic between these two companies, as well as the areas ripe for disruption that they will likely be focusing on next. (Spoiler alert: Both companies think they can help fix the American healthcare experience, and that’s just the tip of the iceberg.)
The Amazon ‘Why’ Approach
“If we want to have a chance at succeeding in our mission, we have to constantly question everything around us,” said Jassy in his letter to shareholders. “A lot of invention is about trying to open doors that have historically seemed bolted shut. And, over the past 30 years, we’ve found one of the most important keys to unlock these doors has been a simple question: ‘Why?’ ‘Why does this customer experience have to be this way?’ ‘Why can’t it be better?’ ‘What are the constraints and why must we accept them?’ ‘Why can’t we invent around that?’ ‘Why?’”
Jassy then went on to illustrate his point by outlining all the various innovations at Amazon that have started with the question “Why?,” beginning with the first question in 1995, “Why can’t we offer customers every in-print book?” That, of course, quickly expanded to include “Why can’t we also offer every out-of-print book?” and then “Why not offer more than books? Why not practically everything?,” leading to the company we know today.
But Amazon’s internal interrogations have long since moved beyond the realm of what products to sell, and it’s these latter innovations that have propelled major evolutions in the realm of ecommerce experience, delivery, logistics and advertising, including:
- Why not include customer reviews, not just those from professional experts, even if they sometimes dissuade a purchase?
- Why should we be the only sellers of items in the Amazon store?
- Why does it take so long to get products to customers?
- Why not show third-party sellers’ offerings on the same product detail pages as the first-party selection (where all the traffic was)?
- Why not allow our sellers to also store items in our fulfillment network and enable those items to have fast, Prime delivery by handling fulfillment for them?
- Why not experiment with relevant advertisements in our store to expose customers to new sellers and items (versus only what our algorithms might surface based on past purchases)?
- Why does every company need its own capital-intensive datacenters and infrastructure? (Leading to the creation of Amazon Web Services.)
- Why do I have to buy a physical video to watch a movie? Why do I need cable or linear TV to watch amazing TV shows? (Prime Video)
- Why can’t I get my Prime shipping benefits on other websites as well as on Amazon.com? (Buy with Prime)
When laid out in a list like this, the changes that Amazon has prompted in the fundamental ways that retail works, and even what the role of a retailer is in today’s world, are impressive. Indeed, Amazon’s solutions to these questions have often resulted in unexpected answers that at first seemed counterintuitive: A retailer letting other companies sell from its store? A retailer offering a streaming content service? A retailer selling its technology to other retailers? A retailer offering its industry-leading delivery service to other merchants?
“Every one of these ‘Whys’ have led to significant invention, and every one of them have made customers’ lives better and easier,” concluded Jassy. “Some of these seem obvious now, but at the time these were provocative questions that required curiosity, risk-taking, experimentation and persistence to make these into success stories.”
And the fact is that, time and time again, it’s worked out well for Amazon, leading to the ultimate question: Why stop? The answer, of course, is that the company doesn’t plan to: “We operate like the world’s largest startup in large part because of our culture of ‘Why,’” Jassy added. “We don’t always get everything right, and we learn and iterate like crazy, but we’re constantly choosing to prioritize customers, delivery, invention, ownership, speed, scrappiness, curiosity and building a company that outlasts us all.”
Which brings us to…
The Walmart ‘And’ Approach
Throughout its history, Walmart also has reinvented retail in its own way, although much of its innovations have come in the brick-and-mortar realm. After all, the internet didn’t exist when Walmart was founded back in 1962, and it wouldn’t come along for another 30 years. Decades before Amazon evolved into “The Everything Store,” Walmart already was an Everything Store, with locations in nearly every town and city in the U.S.
In fact, the innovations that Walmart employed to become the world’s largest retailer informed Amazon’s playbook as that company started to build its empire in the ’90s. Amazon adopted a very Walmart-esque prioritization on low prices as a means to tamp down competition and drive volume, as well as rapid category and geographic expansion.
More recently, though, Walmart has shifted somewhat out of the realm of first mover when it comes to new innovations, making its current strategy seem a bit more along the lines of “business as usual AND whatever Amazon is doing.”
This isn’t a criticism of Walmart. Walmart is now a well-established global company with a massive share of consumer spend, so maybe it’s okay for the company to leave invention (and the inevitable failures that come along with that process) to younger upstarts like Amazon. What Walmart has been doing really well lately is taking the innovations that work at Amazon and translating them into its unique business. These include the launch of its own third-party marketplace and subsequent retail media offering, the debut of fulfillment services for sellers on its marketplace, offering access to data insights to brands that sell through both its stores and website, and starting to white-label some of its services for use by other retailers.
Here’s how Walmart U.S. John Furner broke down Walmart’s current opportunity to “be America’s favorite retailer” in a recent statement following the company’s April investor meeting.
- Growth: Furner still see “substantial upside for further expansion” of sales in the U.S., and as proof pointed to the fact that the company has added $121 billion in sales over the past five years. “The goal is to become America’s favorite place to shop by focusing on a clear customer value proposition — price, assortment, experience and trust.” While Amazon also has price and assortment, experience and trust are certainly areas where Walmart can stand out, in particular across its massive store footprint.
- Omnichannel: For Walmart this doesn’t just mean offering ecommerce and brick-and-mortar side by side. It’s about leveraging its stores to deliver experiences that ecommerce operators can’t replicate, like in-store pickup, returns and fulfillment. In fact, Furner said that Walmart is “well-positioned”to begin delivering to 95% of U.S. households in under three hours later this year.
- Business Mix Accelerators: The company will continue to invest in “key business accelerators that not only fuel growth, but bolster profitability and drive incremental margins,” said Furner, including the Walmart+ membership program, Walmart Connect, Data Ventures and fintech. All things, of course, that Amazon did first, but that Walmart is bringing a unique flavor to, seasoned in particular by its store network (think, gas discounts for Walmart+ members and data insights for suppliers that combine in-store and ecommerce shopping behaviors).
- Supply Chain Transformation: Walmart said that its supply chain is rapidly transforming to leverage independent assets — including stores, fulfillment and distribution centers, pickup and delivery — into one omnichannel supply chain network by using data, intelligent software and automation. (Also similar to what Amazon has, but with the major differentiation of the company’s more than 4,600 U.S. stores.) The result of this synchronization across all its assets will be faster fulfillment at lower costs.
Walmart’s biggest advantage in the battle with Amazon remains its stores, an area where Amazon, despite ample effort, has failed to find traction. Another advantage, however, might be that Walmart has tended in recent years sit back and watch as Amazon takes on the risk and expense of trying out wild new ideas, then jumps on only the opportunities that prove to be successful. There’s a benefit to letting someone else do the failing for you.
“As I look around the world, I don’t see another company like Walmart,” said McMillon in the investor update. “Our purpose, strategy and strengthened financial future are aligned. We’ve got the right business model design and we’re executing against it. We’re positioned well digitally, not just physically. We’ll be where the customers are. We like our position, and we like our plan. We wouldn’t trade with anyone.”
Stay tuned for Part Two of this story, coming Thursday, which will take a look at why Walmart’s wait-and-see posture in a world where Amazon is always asking “Why?” might very well be the smart play. We’ll also dissect the Why questions Jassy said he’s is pursuing next to get a peek at where Amazon (and very likely Walmart, as well) is looking to innovate in the future (hint: think, even faster delivery and healthcare).
