Ex-Walmart CEO Bill Simon thinks that Walmart’s big brick-and-mortar network of stores gives it an underrated edge against Amazon in a multi-channel world where consumers want smooth online-to-offline commerce experiences.
Talking to CNBC Thursday, Simon noted that while Walmart has its work cut out for them, be believes they go into the competition a hit ahead.
“The question and the challenge for Walmart is, can they redefine their play into more of an omni-channel play than Amazon? Because that’s an advantage for them,” Simon said on CNBC’s “Closing Bell.”
Wall Street was surprised by Walmart’s result this week – with same store sales hitting a rather unanticipated 10-year high water mark in Q2 and major investment in eCommerce, supply chain management and product offerings were successful. Not just in bring consumers to their stores and to their web portal – but also in getting them to build large and more expensive baskets while they are there.
There were some grey spots in the report – sales and earnings are up, but Walmart’s profit margin id sown as it is pushing lower prices and expensive infrastructure redesigns.
“Forty percent e-commerce growth is one of the reasons [Walmart is] struggling a little bit with operating income, because e-commerce is not as profitable as the brick-and-mortar businesses,” Simon said.
But having those brick-and-mortar stores is where Walmart has an arsenal its internet based-rivals do not.
“I am encouraged by the grocery results that Walmart was able to put up this quarter. It’s because they’ve done a lot of hard work in their fresh areas, and fresh is very difficult to compete with online,” Simon said. “As Amazon starts to make traction in the grocery piece in the U.S., they are going to have to struggle with that.”
Gerald Storch, former CEO of Hudson’s Bay and Toys R Us, agreed, noting that Walmart is especially well positioned to fight for dominance in an omnicommerce powered future.
“Everyone is not shopping on the internet, and they never will, so they came to Walmart stores in droves,” the founder and CEO of Storch Advisors said.
Amazon and Walmart may be each other’s biggest competitors, but according to Storch – they aren’t playing a zero sum game – and in fact are both “winning” using different business models to attract consumers.
“There will be two big winners on the internet: Amazon and Walmart. Everybody else better be playing with one of them if they want to be around 20 years from now,” Storch said.