Both Walmart CEO Doug McMillon and Amazon CEO Andy Jassy appeared on CNBC yesterday, making observations about their businesses and the current consumer environment.
McMillon’s comments included:
• “We’re continuing to see traffic growth in store, plus even more transaction growth for pickup, curbside and delivery. As a company our in store business is continuing to grow, but we expect that this trend of faster growth for curbside delivery will continue. And we’re happy to serve people however they wanna be served.
“Customers these days shop in kind of an all-of-the-above way. They use stores, they use pick up, they use delivery. It’s fun to come in here and pick up what you needed for Thanksgiving, and also look at what was available for Black Friday. And that’s the behavior we’re seeing … Everybody’s price sensitive. You know, we went through this period of inflation which has now changed. We’re starting to see some deflation, which we’re happy to see. But as that price sensitivity went up everybody was looking for value and we did really well and continue to with higher-income cohorts.”
• “We don’t like to think of it as trading down to come shop at Walmart. It would be more like people looking for value. But as we’ve shown you, like in our apparel category, we’ve got better brands. We’ve got some great values, even though they’re at higher price points than what we might’ve had in the past. So Walmart has appealed to everybody for some categories forever. Like, we sell a lot of bicycles and flat panel televisions. But these days we’re focused on offering customers what they want in apparel and home and some other categories that have more of a fashion component so that we can serve everybody better. And then bring along services like Walmart+ so that you can get free delivery and hopefully retain those customers that have been coming to us in recent times.”
“Last quarter in Walmart U.S. we were up 24% in ecommerce. That’s driven by pick up at store level, delivery from stores, and also ecommerce fulfillment deliveries, which are either first party owned inventory, or our third party marketplace, which is really growing, which is enabling us to develop more services, have an ad business, have a fulfillment service business, things like that. So … We’re growing share across categories. And I think part of it is because now you can get the Walmart price in a broad assortment in any way you want it.”
In his separate appearance, Jassy made the point that consumables and speedier delivery are to a great extent driving the company’s retail business.
A lot will have to go bad before “people stop investing in detergent and shampoo and soap and things like that. And if you look at our consumables business, the growth rate there is pretty extraordinary.” In large part, Jassy said, that’s because “we’ve been able to speed up our delivery so much in the last year and so when you can get items to people same day or next day at the latest, they end up considering you for a lot more purchases.”
Jassy also said that while people are being careful about spending on more discretionary items, “Consumers are still spending, they’re being careful about what they spend on and they’re looking for bargains and deals wherever they can, and wherever they can trade down on price they’re trying to do so.”
Here’s what Jassy had to say about faster delivery times at Amazon:
“Well, first of all, if you look at just the first half of this year in our top 60 metros, over 60% of the shipments were coming to people in the same day … or one day. So a lot of it has to do with a combination of two things.
One is when we took our U.S. fulfillment network from a flat national network to eight regional hubs, we redid all the placement algorithms to get items close to where we’re shipping to customers. We were not only able to take the transportation distances down, which lowers your transportation costs and speeds up delivery to customers but we also took our costs served out so those were it was a great customer experience, benefit for customers getting a faster and then also a total cost to serve down.
“And the other thing is that we have these sub same day facilities, which are a different service. So basically there’s like in the same day, in just a few hours and the average purchase in those same day facilities from click to being ready to ship is 11 minutes. So it’s a different design in those fulfillment centers. And we have top million, we’ve got a million SKUs that we can ship out of there will be shipped in the same day. So we moved from today to a lot of the shipments being one day and then increasingly we’re being able to ship items to people in the same day.”
KC’s View:
They talked about a lot more, and you can read more here and here.
I would imagine that in some ways, these appearances help t make the argument for why kroger and Albertsons should be allowed to merge – Walmart and Amazon are so powerful and so fully resourced that it is extremely challenging tom compete with them. Of course, that won’t be the only criteria used by the Federal Trade Commission (FTC), which also needs to look at downstream competition as well as upstream.
I’m particularly interested in what Jassy had to say about consumables – it does seem lately as if those kinds of items are showing up faster, even if some other items take a little longer. You have to keep in mind, though, that Amazon’s growth isn’t just about those sales, which all by themselves take transactions away from other retailers. They also create patterns of expectation, drawing people into Amazon’e ecosystem.
Which is what Walmart also is trying to do.
To compete with that, you have to have a truly compelling, differentiated offering.
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