Home » Behavioural Investing » Wal-Mart wants to Butt Heads with Amazon over #ecommerce $WMT $AMZN Stubborn like an Arkansas Mule

Wal-Mart wants to Butt Heads with Amazon over #ecommerce $WMT $AMZN Stubborn like an Arkansas Mule

Wal-Mart (NYSE) looking to keep growth alive is looking at building huge warehouses and competing against Amazon in the E-Commerce space. A couple of Black Swan events to think about. Wal-Mart given its rise, does have a master of the universe mentality. Wal-Mart destroyed small downtown neighbourhoods and sanctified big box retail in suburban locations. They offered the cheapest price and turned everything into a commodity. The product line is the me too stuff or block buster products guaranteed to be hot. No real merchandising designed to offer and entice.

Yes Wal-Mart is building large warehouses. But a warehouse is a cement floor, cheap aluminum walls and a roof that hopefully holds up. 66% of the US population lives 5 miles away from a Wal-Mart store. So a fleet of trucks should be able to deliver very easily. Building warehouses and buying trucks is not difficult. Running a mean and lean logistical infrastructure will be difficult. Wal-Mart outsources major components and relies on intimidation to manage vendors. They do not have a holistic self managed culture.

Wal-Mart depends on consumers coming into the store and not remembering the cost of commuting. Cloud e-commerce will need to absorb the cost of delivery. With the lowest price in the land the margin does not have room for further discounting. You will not be able to make much money on cheap toilet paper or cases of heavy soft drinks with razor-thin margins. When you pick up some cheap sweat pants and a few T-shirts you are not interested in a delivery charge. When you buy something fashionable from Amazon the delivery charge is negligible after all the value added.

Amazon meanwhile is leading in e-commerce by offering value added products not the cheapest. The e-commerce business will be driven by software in the cloud. Wal-Mart buys its software and relies on third part developers to keep it fresh and competitive. Wal-Mart has not varied its model from day one.

So if someone is expecting battle between an Arkansas Mule and West Coast Cool my money is on cool. Wal-Mart is not a true innovator.

George Gutowski writes from a caveat emptor perspective. Personal preferences tend to West Coast Cool. I rarely need an Arkansas Mule.