Wal-Mart Stores Inc. and Google certainly recognize the importance of challenging Amazon.com Inc.’s ever-stronger grip on U.S. e-commerce, and their plan to join forces for online ordering and delivery is a step—but just one step—in the right direction.
“I think it’s more evidence that Google and Walmart jointly recognize the growing risks of Amazon and maybe it’s evidence that some of the bigger players are willing to start working together,” says retail analyst Matt Nemer, senior advisor at investment banking firm ComCap LLC.
Walmart, No. 3 in the Internet Retailer 2017 Top 500 Guide, and Google on Wednesday announced that Walmart would begin selling through the Google Express online shopping platform. Walmart also will enable consumers to buy products via Google Home voice-activated devices, and allow a shopper to link her Walmart account with her Google Express account so that the Google Home devices can easily access her in-store and online shopping history with Walmart.
“Walmart was under pressure to have an answer [to voice-activated devices],” says Keith Anderson, senior vice president of strategy and insights at price-monitoring firm Profitero. “They were always unlikely to build their own competing speaker. I don’t think this solves their entire challenge as it relates to voice. It’s more sophisticated than what I’ve seen others do to integrate with Google Home.”
Amazon (No. 1) offers voice-based ordering through its voice-enabled Echo, Echo Dot and Tap devices, all of which run on its Alexa virtual assistant software.
Walmart’s arrangement with Google, which Walmart president and CEO of U.S. e-commerce Marc Lore said is an attempt at better competing with Amazon, was hailed in some circles as being yet another example of Walmart’s forward-thinking mentality.
“The move is an intelligent and natural joint venture for both Walmart and Google, given that Amazon’s Alexa was more/less closed off to other retailers,” writes Chuck Grom, senior retail analyst with Gordon Haskett Research Advisors.
In the short term at least, the move is expected to get more retailers thinking about if—or, more likely, when—they’re going to start enabling voice-based ordering.
“It’s a very strong signal that voice is coming quickly,” Anderson says. “Even though most people associate it with these standalone speakers, there’s no reason that anyone with a laptop or a smartphone can’t use voice. This is a signal that retailers that don’t already consider voice a major priority need to at least start exploring what their options are.”
“This tells us that we’re moving more rapidly in the direction of voice being an important way to order products online, first to search for and then to order,” adds Bill Bishop, co-founder and chief architect at retail consulting firm Brick Meets Click. “When you do that, it’s a whole new level of convenience and that will invite more people into the e-commerce activities.”
As part of the move, Google has dropped all membership fees from Google Express, instead making it free for everyone. Google had charged consumers $95 per year or $10 per month after a three-month trial. More than 40 retail chains sell on Google Express, including the likes of Staples Inc. (No. 5) Costco Wholesale Corp. (No. 8) and Kohl’s Corp. (No. 18).
Walmart’s entry into voice-based ordering and Google’s decision to drop the membership fee for Google Express as ways to attract more customers are smart moves, but experts say those initiatives are unlikely to significantly dent Amazon’s dominance.
“The problem is every time a competitor tries to close the gap, Amazon does something new,” Profitero’s Anderson says. “The only thing I’ve seen Walmart do is at least offer the discount for in-store pickup. It’s the first consumer expectation that Walmart is setting that isn’t just responding to an expectation that Amazon had set.”
The other question facing this new Walmart-Google arrangement—and just about any other retail partnership that has designs on taking on Amazon—is how will it win wallet share from the growing number of Amazon Prime members?
“Based on audience alone, the Google and Walmart partnership may have some success chipping away at Amazon’s advantage,” says Ryne Misso, marketing director at market research firm Market Track LLC. “But chipping away does not necessarily mean they have made significant progress toward catching up with Amazon. The key question here is, can Google and Walmart provide consumers a compelling reason to abandon their Prime memberships and forego shopping on Amazon?”
Prime is Amazon’s loyalty program which offers benefits such as free expedited shipping and streaming video among other perks. A recent estimate from financial services firm Cowen & Co. that was based on a survey of 2,500 U.S. shoppers in July estimated that Amazon has 54.2 million Prime members, up 17.1% from 46.3 million last year. Shoppers pay either a $99 annual membership fee or a $10.99 monthly membership fee.
Keith Anderson says Google Express hasn’t caught fire with consumers yet because shoppers in the U.S. have reached a point of membership fatigue.
“People aren’t going to join two or three membership programs,” he says. “Part of the reason Amazon wins is everyone’s already on Amazon.” Consumers are familiar with the user interface on Amazon, and they do not compare multiple retailers on one site as they do when they land on Google Express, Anderson says.
“Our latest shopper survey showed us that 89% of consumers shop on Amazon and 50% are Prime members,” MarketTrack’s Misso says. “Amazon has such a well-established subscription business and such significant market penetration among U.S. consumers that it is difficult to see another subscription service catching on at the same level as Prime.”
Some industry experts say the ability to link a shopper’s Walmart account with her Google Express account could heighten the rate of customer engagement.
“Although Walmart lacks in product breadth compared to Amazon, they can leverage their greater depth of customer base purchase history data to develop more personalized experiences,” says Mike Grimes, president of North America at point of sale marketing technology provider Ecrebo. “The main question to determine the outcome of this battle will be whether shoppers value broader product ranges more than the convenience of a tailored experience. Personalization will start leveling the playing field for Walmart, and for any other brick-and-mortar retailer smart enough to fully leverage this asset.”
Bishop says Walmart’s decision to join forces with a tech giant in Google, and not another retailer, to compete with Amazon will lead to other retailers following suit, although to varying degrees.
“Retailers will find themselves needing to affiliate with some of the large digital platforms,” Bishop says. “These big platforms are going to be integral in the connection between retailers and consumers in some significant ways. If you put all those things together, one would see a vision of the new retail environment where a lot of technology heavy lifting [such as geotargeting and search] is being done by the large platforms.”
ComCap’s Nemer says that because Google Express doesn’t have much traction just yet with consumers, the key to growing that audience will lie not in adding more big-name retailers to the platform but rather targeting some of the smaller local players that give Google the upper hand when it comes to a unique product assortment.
“They’ve got Walmart, now it’s time to go after the niches that provide something that’s really interesting and unique,” Nemer says. “If you look at Amazon Fresh in L.A., they’ve got the [food] specialists that are really well respected for whatever they do, their niche, versus signing up Dick’s Sporting Goods. I think that differentiation is the key.”
In fact, that’s what Walmart is doing as it buy small niche retailers like vintage-inspired apparel retailer ModCloth, says Eric Roth, managing director and head of the consumer retail group at Lazard Middle Market
“Walmart continues to be very active in looking at a lot of things in the e-commerce space,” Roth says. “Walmart is going to continue to buy niche retailers. They don’t want to buy mega businesses that are a billion dollars in revenue necessarily. They want to buy things that are smaller that they can create slices of the world with.”
Others agree with Nemer about differentiation. Guru Hariharan, CEO of retail and e-commerce pricing analytics firm Boomerang Commerce, says retailers should focus on unique products or experiences and not necessarily on teaming up with another company, which could dilute their brand or individuality.
“If you look at the market share that Amazon and Walmart and Google go after, it’s similar in that they’re trying to sell everything to everybody,” Hariharan says. “The reason why companies like Home Depot and Lowe’s are doing well is they have figured out the right customer segment to go after. Does that customer require same-day delivery through a voice-activated ordering system? Probably not. This is a day and age where if you’re looking into the next five years in retail, things will shake out where retailers that offer a differentiated experience will survive.”