The Battle for Online Dominance

Walmart.com’s CEO, Neill Ashe, announced in early 2013 that the online division of Walmart stores was on pace to reach its goal of $9 billion in revenue in its 2014 fiscal year (February 2013 through January 2014).1 In addition, Ashe noted that, after extensive website overhauls to improve search functionality and overall user experience, website traffic had increased 20 percent over the previous year, with over one-third of all visits coming from mobile devices. Ashe told reporters at Walmart.com’s media event that he felt that Walmart.com was demonstrating its ability to match any other e-commerce company. By combining its online capability with its massive retail operations, Ashe said Walmart was poised to “provide a commerce experience no one else can provide.”2
Ashe’s positive outlook obscured the long difficulties Walmart.com had experienced trying to compete with Amazon.com, the largest Internet retailer in the United States, and the uphill battle Walmart.com still faced. Even with revenue of $9 billion,3 Walmart.com was far behind Amazon’s $74 billion, suggesting that considerable growth would be needed if the company was to match Amazon’s online sales of products that fell into Walmart’s traditional sales categories. Company executives and the e-commerce branch had not always seen eye-to-eye regarding the importance of investing in online capabilities. The result was that Walmart.com did not receive the necessary funds to invest in state-of-the-art website design or online fulfillment systems during several years of its early history.
With Walmart.com still behind Amazon, Mike Duke, CEO of Walmart Stores, had grown increasingly concerned that his company might have ramped up its efforts in online retail too late and would have to continually play catch-up with Amazon. In 2010, Walmart headquarters made new commitments to transforming its site in terms of navigability, search, and overall customer experience to take advantage of continuing ecommerce growth.4 Despite this, by 2013, Walmart.com accounted for just about 1.7 percent of total company sales.5 In the midst of these challenges and opportunities, Duke wondered what it would take for Walmart to finally participate in e-commerce revenues at a rate more consistent with its dominant retail store presence, and in particular, just how he could finally beat Amazon.

Walmart’s History

Walmart grew from humble beginnings as a country discount store in Rogers, Arkansas, in 1962 to the world’s second largest public corporation.6 Sam Walton, the company’s founder, envisioned a retail store that offered low prices and great service. Focused on offering the “lowest prices anytime, anywhere,” the company grew rapidly. By 1972, Walmart was listed on the New York Stock Exchange, and its 51 stores recorded sales of $78 million.7 It reached $1 billion in sales in 1980, making it the fastest company to ever do so at the time.8 In 1983, the company opened its first Sam’s Club, a wholesale retail store, and installed a computer system
1

EXHIBIT 1 Storewide Key Financials—Walmart, 2009–2013 ($ million)
2009 2010 2011 2012 2013
Revenues 401,204 408,214 418,952 446,950 469,162
Net income 13,400 14,335 16,389 15,699 16,999
Total assets 163,429 170,706 180,663 193,406 203,105
Total liabilities 98,144 99,957 109,416 117,241 121,367
Employees 2,095,000 2,100,000 2,100,000 2,200,000 2,200,000
Source: Marketline.

that brought additional cost savings by allowing stores to communicate product and inventory needs in real time via the company’s private satellite system, the largest in the United States.9
The first Walmart Supercenter, which combined general retail operations with a full-scale supermarket, opened its doors in 1988.10 Walmart became the largest retailer in the United States in 1990 and expanded internationally in 1991, with its first stores outside the United States located in Mexico. The 1990s were full of milestones as Walmart recorded its first $1 billion sales week (1992); expanded into Canada (1994), China (1996), and the United Kingdom (1999); and celebrated its first $100 billion sales year in 1997.11 In 2002, Walmart reached another milestone, topping the Fortune 500 list for the first time12 (see Exhibit 1 for Walmart financials).
Initially, the company grew rapidly by increasing its number of retail locations worldwide. Walmart first introduced online shopping to customers via Walmart.com in 1996. Early versions of the website were slow and unattractive, and initial attempts at establishing market dominance online resulted in embarrassing failures. During the second half of the 1990s, companies such as online bookseller Amazon continued to expand into the Internet retailing market.

Amazon’s Backstory
Amazon founder Jeff Bezos started his business by packing and shipping book orders out of his garage in 1995. The Internet, he believed, offered an ideal medium for delivering lower prices and better title selection to customers. Within two months of its launch, Amazon sales topped
$20,000 a week.13 Amazon grew rapidly, went public in 1997, and began selling CDs and movies online. It was around 1999 that Amazon began morphing into the online retailer it is today. Bezos wanted Amazon to become the “Everything Store,”14 allowing customers to buy anything they wanted at the lowest prices and from the convenience of their own homes. After success- fully transitioning from selling only books to general retailing, Amazon continued to grow its customer offerings and business. By 2013, Amazon had reached over $74 billion in revenue15 (see Exhibit 2 for Amazon financials).

EXHIBIT 2 Storewide Key Financials—Amazon, 2008–2012 ($ million)
2008 2009 2010 2011 2012
Revenues 19,166 24,509 34,204 48,077 61,093
Net income 645 902 1,152 631 389
Total assets 8,314 13,813 18,797 25,278 32,555
Total liabilities 5,642 8,556 11,933 17,521 24,363
Employees 20,700 24,300 33,700 56,200 88,400
Source: Marketline.

Two Very Different Business Models
Historically, Walmart and Amazon had very different business models. Walmart grew by employing a low-cost leadership strategy in brick-and-mortar stores. Amazon relied on an e-commerce-based model to drive its meteoric growth. A closer look at each business reveals important differences in each company’s respective strengths.

Walmart’s Principles of Retail
Walmart had risen to world dominance by relying on the simple principles of retail: Buy and sell at low prices, enjoying thin profits margins but high sales volume. Although most retailers follow these basic rules of thumb, Walmart expanded volume further by passing much of the cost savings on to the end consumer through lower prices. By pricing low and driving volume, Walmart successfully pushed its competitors onto the sidelines by pricing everyday products lower than anyone else.
In order to offer the lowest prices possible, Walmart worked hard to drive down its supply costs by negotiating lower prices from suppliers and reducing logistical expenses. As Walmart increased its stores, its bargaining power with suppliers increased. Eventually, Walmart became so large that the company was able to demand price concessions from suppliers who had come to rely heavily on Walmart’s business.
Walmart also managed its logistics effectively. Shipping products from the manufacturers to the retail store can be a logistical challenge and, if managed poorly, could lead to higher costs. To address this, Walmart built regional distribution centers that stocked almost every item sold in its stores. Trucks then hauled products from the warehouses to the local stores. This distribution model resulted in inventory cost savings because products were pooled in regional super warehouses and shipped more quickly to stores than if products were coming from a central distribution center.
With its successful retail model, Walmart successfully and substantially increased demand for the products on the shelves and drove the company to record-breaking growth over a half century.

Amazon and E-commerce
Unlike Walmart, which relied on brick-and-mortar stores, Amazon focused on an e-commerce business model in bookselling to launch its business. Without physical stores, online retailers eliminated the many costs typical retail operations incurred, including the construction and maintenance of stores or leases for store locations. Additionally, selling products over the Inter- net from central warehouse locations required a much smaller workforce to fulfill orders, giving Amazon and other online retailers an advantage over traditional retailers.
Amazon’s initial business model wreaked havoc on the brick-and-mortar bookselling industry. Lower fixed costs allowed the company to pass cost savings on to its customers, which quickly led to increased market share. The Amazon model also allowed for a much greater selection of books than was available in typical stores. Instead of being limited to the titles stocked at a Barnes & Noble bookstore, Amazon customers had access to virtually any book published and carried by wholesale book distributors. After tackling books as a product cate- gory, Amazon extended its commerce into dozens of other categories.

The Battle for Online Dominance
Walmart and Amazon had both risen to prominence in their respective spheres. As the companies continued to expand into overlapping areas, they began to see each other as relevant competitors. By the year 2000, Walmart had mastered the business of brick-and-mortar retail,

but its website was very basic, consisting of a list of categories and an electronic shopping cart. The company seemed to finally recognize the need to develop a stronger online business to combat Amazon’s encroachment in the retail product categories that Walmart had dominated. (See Exhibit 3–6 for size and growth of the online retail market.)

EXHIBIT 3 Online Retail Market Value, 2008–2012
Year $ billion
2008 132.3
2009 133.4
2010 152.9
2011 172.5
2012 200.4
Source: Marketline.

EXHIBIT 4 Online Retail Market Value by Geography, 2012
Geography $ billion
Europe 230.6
United States 200.4
Asia-Pacific 155.7
Rest of the World 45
Total 631.7
Source: Marketline.

EXHIBIT 5 Online Retail Segments, 2012
Category $ billion
Electronics 43.8
Books, music, and videos 40.5
Apparel, accessories, and footwear 18.5
Other 97.6
Source: Marketline.

EXHIBIT 6 Projected Growth of Online Retail, 2012–2017
Year $ billion
2012 200.4
2013 232.5
2014 259
2015 293.8
2016 331.1
2017 371.4
Source: Marketline.

The Early Years of Online Retail
For Amazon, the Internet was its only distribution channel, and this allowed the company to bypass physical store locations completely. Walmart viewed its online activities as an extension of its physical stores. Amazon began its online business in 1995 with a focus on offering customers a less expensive and increased selection of books. At the time, Walmart’s only worry was that book sales would decline in Walmart stores as Amazon’s popularity grew. Although book sales represented a meaningful revenue stream for Walmart, they were in no way the company’s core business.
Walmart’s initial website in 1996 was awkward and featured a digital version of a Walmart store greeter that drew ridicule from across the tech community as an embarrassing design blunder. It was clear that Walmart’s expertise in retailing failed to translate into online success. The company’s online fulfillment system was so dysfunctional that in 1999 the company announced that it could not guarantee pre-Christmas delivery of any online orders made after December 14.16 Walmart executives, however, didn’t seem to notice the company’s digital shortcomings. With Walmart expanding and building supercenter stores across the country at a rapid pace, company leaders had their plates full with the challenges of blazing growth in other areas. Many seemed to consider web sales an unproven and futuristic growth strategy, and they appeared to steer clear of a technology they didn’t quite understand.
After a few years of successfully gaining market share in book sales, Amazon founder Jeff Bezos started to target brick-and-mortar retail stores. Bezos, who had been named Time’s Man of the Year in 1999 for popularizing online shopping, began to call for Amazon to become the “Everything Store.”17 Amazon expanded its original books-only model, slowly rolling out options to purchase CDs, DVDs, clothes, and even food online. Bezos recruited 15 Walmart Information Systems Division employees to work at Amazon, including Walmart’s former chief information officer, Richard Dalzell, to help the e-commerce retailer “expand its internet retailing system for selling books, compact discs, and drugs.”18 Walmart took notice of Amazon selling the same products online that it offered in its stores, and it filed a lawsuit, claiming Amazon had recruited Walmart employees in order to steal trade secrets. Although the two companies later settled out of court, the fierce competition between them became public.
In 2000, Amazon added another innovation by allowing third-party retailers to sell on its site. These sellers—often direct competitors with Amazon—sold products on Amazon.com in order to take advantage of the higher website traffic. In addition, Amazon started an affiliate sellers program in which small websites that advertise or refer products found on Amazon.com would receive a finder’s commission.19 Walmart.com did not introduce its own third-party marketplace until 2009.20

Walmart.com’s Spinoff from Walmart
In 2000, Walmart decided to spin off its website into a separate e-commerce business, Walmart
.com, partnering with Accel Ventures, a Silicon-Valley-based venture capital firm that focused on investing in technology-based companies.21 The new company moved from Arkansas and established its headquarters in Silicon Valley. The move to California was made in hopes that proximity to the nation’s top hotbed of technology and talent would fuel an online experience that more closely matched customer preferences.
Shortly after setting up shop in San Bruno, California, in the fall of 2000, managers at Walmart.com shut down the website for a month to revamp.22 The shutdown also came at a time when most retailers were ramping up operations in preparation for the holidays. Many internet savvy companies mocked Walmart for taking its site offline.23 Other e-commerce web- sites usually continued to operate while small updates and improvements were made to a site. By shutting down for an entire month, Walmart missed out on a month’s worth of sales (see Exhibit 7).
In 2001, Walmart bought out Accel Venture’s ownership in Walmart.com to have complete control of its website.24 The retail giant announced the move was made to better integrate online and offline sales by removing any outside company’s ulterior motives. Historically,

EXHIBIT 7 Top Ten Holiday Retail Websites, Christmas Day 2012
(total US visits)
Rank Websites Visits
1 Amazon.com 24,657,838
2 Walmart 7,359,685
3 Target 3,591,384
4 BestBuy 3,431,900
5 Macy’s 1,949,547
6 Sears 1,881,690
7 Fandango 1,802,465
8 Kohls.com 1,738,424
9 Apple Store 1,728,247
10 J. C. Penny 1,576,870
Source: Experian Marketing Services.

in-store sales at Walmart had been backed by one of the strongest procurement and fulfillments systems, but online sales had frequently encountered hiccups in fulfilling orders through Walmart.com and were unable to do so in a timely and low-cost manner.
By 2002, Walmart had yet to realize synergies between online and offline retail outlets. Physical store sales and locations continued to expand at a rapid pace, but Walmart.com grew only modestly. Although Walmart pulled in over $219 billion in gross revenues in 2002, earning the top spot on the Fortune 500 list25 and making it the only retailer in the list’s top 10, its website lagged when compared to those of other online retailers. In a 2002 comScore report that ranked e-commerce sites based on site traffic, Walmart came in number 13, trailing Yahoo Shopping, Dell, Barnes & Noble, and MSN Shopping.26 The list’s number one and number two spots were claimed by eBay and Amazon, respectively. The study results showed that Walmart
.com had a long way to go if it ever wanted to compete favorably with Amazon.com.
Analysts and the business world in general were baffled over Walmart’s inability to successfully make the transition to e-commerce. Surely, the company had enough expertise to be able to handle the logistics required to keep shipping costs low for online orders. And with the revenue from the stores and their stockpile of cash, Walmart could easily afford to invest in better technology to support its online push. But Walmart.com failed time and again to make any significant advances.
Contributing to the holdup was a clash of cultures between store headquarters in Arkansas and e-commerce leadership in California. The website’s engineers were focused on generating high revenues and growing as sales continued to rise. Company executives in Walmart’s headquarters, however, looked at the online business in a totally different light. Historically, Walmart’s success had been driven by an intense and unrelenting focus on profits. The first stores were so successful because Walmart founder Sam Walton and other executives drove huge cost reductions from suppliers due to the increased demand its low prices sparked in customers. Since the 1960s, all business decisions had been made with one goal firmly entrenched in every Walmart executive’s mind: Reducing costs drives profitability.
By contrast, tech companies often operated on net losses for years. In many cases, as a site built its user base and delivered true value to customers, it eventually became profitable. In fact, Amazon operated for years without making a profit. Walmart.com’s engineers, many recruited from successful tech companies, expected enough funding to get the website off the ground and running smoothly. Walmart executives, however, were unwilling to commit the funds that engineers thought were necessary for the website to gain real traction. One former executive said that each year Walmart.com would begin a “five-year planning exercise, but the plans were never executed and management would say the sales weren’t there to justify the

capital investment.”27 The bottom line was that Walmart.com’s slow growth owed in part to the fact that it did not have the funding it needed from Walmart headquarters. Headquarters would not give its online business the funding it asked for because it had not yet proven its success. The two conflicting viewpoints of conservative, cost-cutting headquarters and “spend big, earn big” Walmart.com created a major culture clash and significantly hampered Walmart’s efforts to establish an online presence.28

Prime, Ship-to-Store, and Other Services
Both Amazon and Walmart introduced new services and products with the hopes of enticing customers to make purchases on their respective sites. Feeling the pressure to respond to Amazon’s expanding business, Walmart introduced two new services in 2002. The first, a stripped-down and low-priced version of America Online’s (AOL) Internet service, lacked features such as instant messaging (included in AOL’s $20/month version) but allowed users access to an unlimited dialup connection for under $10 per month.29 In addition to inexpensive Internet service, Walmart also started a Netflix-like DVD rental service that allowed subscribers to receive DVDs via email and keep them as long as they liked without late fees. Walmart.com priced this offering at a dollar under Netflix’s price at the time. Three years later, Walmart announced it would shut down its movie rental business in order to focus on selling instead of renting movies.30
Amazon also looked for new ways to increase demand for its products and grab more market share from other online shopping sites. In 2005, it launched Amazon Prime, announcing it as “Amazon.com’s first ever membership program. For a flat membership fee of $79 per year, [Prime] members get unlimited, express two-day shipping for free, with no minimum purchase requirement. Members also get one-day, overnight shipping for only $3.99 per item.”31 Prime later expanded its offerings, in 2011, to include instant video streaming for its members.32 Amazon hoped a flat membership fee would be more appealing to customers who had previously avoided or limited their use of online shopping due to high shipping costs. Executives at Amazon had expected Prime to break even in two years and were astounded to reach break-even after just three months.33 Prime subscribers increased purchases on Amazon by an average of 150 percent.34
In 2007, Walmart decided to leverage its existing physical store locations for shipping in hopes of boosting online sales.35 That year, Walmart.com began offering free shipping for any product a customer ordered online but picked up in their local Walmart store.36 Physical stores became a means of boosting sales on Walmart.com by catering to customers who wanted the convenience of ordering a product online without paying for the extra shipping cost. Walmart executives hoped that, by drawing more customers into stores to pick up online deliveries, they would also increase in-store sales.
In the four months following the launch of the “Site to Store” program, Walmart announced customer savings in shipping fees of over $5 million. The company also announced that within the same period Site to Store orders had accounted for one-third of all Walmart.com purchases, with half of these purchases being made by first-time buyers on the site. These customers, Walmart reported, spent an additional $60 in stores while picking up their orders.37

Day of Reckoning
Although the 2008 economic downturn helped Walmart in-store sales grow, it did little to rein- force the company’s gaping deficiency in e-commerce. Furthermore, as the country emerged from the effects of the recession, consumers flocked to online shopping in greater numbers than ever before (see Exhibit 3). More and more traditional Walmart Stores customers complemented or even replaced in-store purchases with online orders from its rival, Amazon.38 As sales in the physical stores leveled off, Walmart’s rapid store building push also tapered off. From 2009 to 2010, Walmart cut its new store development rate in half.39
Sensing that a seismic shift toward online commerce was underway following the recession, Walmart committed to expanding online sales by appointing Eduardo Castro-Wright, the former head of Walmart Stores in the United States, as the new CEO of Walmart.com in 2010. As customers continued to grow more tech-savvy, Walmart’s goal was to integrate the customer shopping experience across every channel of the business, including online. Castro-Wright said, “It’s fair to say that up until about a year ago, when Mike Duke defined what we call the next generation of Walmart as a major initiative for the company, that probably we were not as keenly devoted to creating the kind of shopping experiences across all channels that we are doing today.” Walmart executives hoped an integrated buying experience would help it develop the know-how and experience Walmart.com needed to compete with Amazon and other successful e-commerce sites (see Exhibits 8 and 9). However, given its poor online track record, many analysts were doubtful that Walmart could catch up. “They’re definitely late to the game,” Natalie Berg, co-global research director at London researcher Planet Retail, commented. “And it does not sound like they have a coherent strategy in place.”40 Ignoring the nay- sayers, Walmart began a new chapter for its online presence by aggressively acquiring new technologies, restructuring its organization, and experimenting with new innovations in its product offerings and supply chain.

Technology Acquisitions
Aware that its online shopping experience lagged behind many competitors, Walmart began to acquire small technology companies in hopes of quickly ramping up its technological capabilities.

EXHIBIT 8 Online Traffic Trends, 2012–2013
Amazon Walmart
Sep-12 98,627,108 58,203,957
Oct-12 103,664,423 59,653,716
Nov-12 119,781,871 87,939,359
Dec-12 138,392,869 82,083,892
Jan-13 119,200,891 58,542,307
Feb-13 109,368,101 55,865,635
Mar-13 129,671,037 61,998,068
Apr-13 121,683,470 57,936,534
May-13 122,637,206 59,454,896
Jun-13 126,463,100 59,487,868
Jul-13 130,783,521 61,312,322
Aug-13 133,023,878 62,524,970
Sep-13 128,903,291 57,381,622
Source: siteanalytics.compete.com.

EXHIBIT 9 Top Internet Properties in Revenue, October 2007 and June–August 2013

Rank Oct-07
Domain
Visits/Market Share June–August 2013
Rank Domain Visits/Market Share
1 Amazon.com 11.52% 1 Amazon.com 9.75%
2 Walmart 5.37% 2 eBay 8.12%
3 Target 4.81% 3 Craig’s List 3.01%
4 Half.com 4.45% 4 Walmart 2.03%
5 Dell USA 3.49% 5 MonsterMarketplace.com 1.33%
Source: Hitwise.

It invested in Chinese e-commerce giant Yihaodian, which sold over 180,000 products, employed over 4,000 workers, offered same-day-delivery for essential daily items, and generated $130 million dollars in annual revenue in China.41 However, one of the first acquisitions, Kosmix, a small social media company from Mountain View, California, proved to be most crucial to Walmart.com’s efforts. Kosmix had developed “a social media technology platform that filters and organizes content in social networks to connect people with real-time information that matters to them.”42 Kosmix founders, Venky Harinarayan and Anand Rajaraman, had sold their first company Junglee, which allowed online shoppers to compare prices from other online stores,43 to Amazon in 1998. Walmart purchased their next venture for a sum of $300 million in hopes that this new technology platform would allow it to better match offerings to customer preferences by relying on an algorithm that sought to understand what a user wants “rather than just matching a search query.”44 The acquisition, Walmart claimed in the press release announcing
the deal, underscored “its commitment to social and mobile commerce.”45
In order to further what it called its “global multi-channel strategy,”46 Walmart.com launched a subunit within its online business committed to creating “technologies and businesses around social and mobile commerce”47 called @WalmartLabs. The Kosmix team led the research and development efforts. @WalmartLabs was structured into miniature startup groups, each with its own project and business goal. A group leader acted as the unit’s CEO and was responsible for driving innovation for the team. These small groups developed ideas including a “Scan and Go” smartphone app that allowed users to scan items as they shopped, paying for them at the register by simply scanning one barcode at a special checkout, and an app called Shopycat that suggested holiday gifts for friends based on their social media profiles.48
One of the Kosmix team’s first tasks at Walmart.com was to unify e-commerce sites run by various national business units. When it joined Walmart.com, Kosmix discovered that, on a global scale, Walmart’s e-commerce division was run more like an IT organization than a tech startup. Outsourced projects by each national business unit had led to over 15 e-commerce websites globally. None of them were able to communicate with each other, and all had a different look and feel. The Kosmix team worked to develop a uniform global technology platform called Pangaea.49 In addition, the @WalmartLabs team integrated technology from Kosmix to rebuild a dysfunctional website search function. After revamping its internal search engine and site conversions, the number of visitors who actually bought products on the website increased by 20 percent in eight months.50
Not to be outdone by Walmart.com, Amazon continued to broaden its appeal to online shoppers by expanding into new areas. In 2012, Amazon aggressively moved to buy two companies Walmart.com had initially approached. The first company, Diapers.com, sold diapers and other frequently purchased personal items online. Catching wind that Walmart was negotiating to acquire Diapers.com, Jeff Bezos contacted the owners of Diapers.com with his own offer and started selling diapers on Amazon.com at a loss. In a matter of weeks, Diapers.com’s owners saw the company’s market share eroding so fast that they had no choice but to sell to Bezos. Later that year, Amazon beat out Walmart.com’s efforts to acquire automated shipping company, Kiva Systems, which utilizes robots to fulfill orders in its warehouses.51

Walmart’s Reorganization
Prior to 2011, Walmart’s e-commerce heads in each country had reported directly to the global Walmart.com CEO, Eduardo Castro-Wright, in San Bruno, California. In late 2011, however, Walmart headquarters announced a shuffling in the reporting structure in some of its strongest foreign markets. E-commerce leaders in Canada and the United Kingdom would now report directly to the head of each country’s Walmart business unit.52 The retailer hoped the reorganization would create better synergies between physical and online store sales.
Castro-Wright announced his plans to retire in October 2011, after less than two years on the job.53 Many speculated his retirement had been mandated by Walmart executives as a result of lackluster online sales and an inability to bring e-commerce initiatives in its foreign business units to fruition. Neil Ashe, former president of CBS Interactive, was hired to take his place.

Ashe believed in the importance of online expansion and criticized the lack of priority Walmart executives had given online efforts in the past. His plan was to gradually transform Walmart into a fully integrated on- and offline experience. When asked how long it would take to achieve this goal, Ashe replied, “It will take the rest of our careers and as much as we’ve got. This isn’t a project. It’s about the future of the company.”54

Innovating to Compete
With a new, aggressive leader at the head of Walmart.com, the battle between Walmart and Amazon for online domination intensified over the next few years. Each company sought to gain an online leg-up through product and supply chain innovations.
Amazon continued to venture into new business areas in order to provide more and better products to its customers. In 2007, it introduced the Kindle, one of the first e-book readers, as a platform to sell e-books. In 2008, Amazon started to focus its “internetification” on the grocery business. AmazonFresh, a same-day grocery delivery service, was available to customers in the Seattle, Washington, area. Food and groceries sales were expected to grow over 20 percent from 2013 to 2017, as compared to an increase of 11 percent for e-commerce in general during the same time period.55 In June 2013, Amazon announced it would expand its AmazonFresh service to Los Angeles, California. Amazon, it was rumored, planned to further expand its grocery delivery business to 20 additional cities in 2014 and 20 more soon after, a move some thought was necessitated by the fact that margins on Amazon’s groceries were one-sixth those of Walmart’s in-store grocery sales.56
In a delayed response to AmazonFresh, Walmart piloted an online-grocery, same-day delivery service in San Jose, California, in 2011. Walmart’s UK subsidiary, Asda, had successfully operated a grocery delivery business in Great Britain for a number of years. Although the San Jose initiative proved successful, Walmart.com waited to expand in the United States because the low population density in the US market made delivering groceries ordered online more difficult and expensive to roll out.57
Hoping to provide greater convenience and security for online shoppers, Amazon and Walmart employed innovative technology and delivery systems to ensure customers actually received their online orders. Walmart expanded its “Site to Store” model to over 660 FedEx office stores across the country. Customers could select the nearest FedEx or Walmart store as the shipping address and pick up packages at their convenience. Customers who worried that packages might be stolen off their doorsteps now had a convenient delivery option, and packages were never left unattended. Amazon responded that year with delivery lockers in convenience and grocery stores, offering similar delivery convenience and security as Walmart’s program.58 In 2013, Walmart also announced plans to install its own delivery lockers in Walmart retail stores.59
Amazon hoped the small fees it paid each month for stores to house its lockers would be offset by increased purchases and decreased shipping costs by delivery companies such as FedEx, which charged up to 20 percent less for locker deliveries over residential drop-offs. Delivery companies found it cheaper to deliver multiple packages to one location than to take many individual parcels to each customer’s house. Walmart had an advantage over Amazon in locker deliveries, however, because each of its over 4,000 retail locations could be used as a pickup point for customers wanting the convenience and security of locker pickup. Walmart, unlike Amazon, also did not have to worry about renting space for its lockers.
In addition to more convenient and secure deliveries, both Walmart.com and Amazon wanted to get packages to customers even faster. In order to get a package to a customer in 24 hours, Amazon invested heavily in new warehouses located near major metropolitan areas. In 2013, it was reported that Amazon had “invested roughly $13.9 billion since 2010 to build 50 new warehouses, more than it had cumulatively spent on storage facilities since its 1994 founding, bringing the total to 89 at the end of 2012.”60 In late December 2013, Amazon CEO Jeff Bezos even announced plans to begin using drones for package delivery starting in 2015 at the earliest.61

Walmart.com executives, on the other hand, sought to redefine the company’s traditional approach for online deliveries. In 2013, the retail giant sought to further leverage its expertise in physical store sales to boost online units with a new strategy called “Ship from Store.” When a customer placed an order online, instead of shipping from a warehouse in another state, with the “Ship from Store” system, a Walmart employee in a retail store would take the ordered item off a shelf, box it up, and give it to a FedEx or UPS truck for local delivery. The delivery would then take a few minutes or hours instead of a few days, thereby improving the customer’s online shopping experience on Walmart.com.62 Walmart even toyed with the idea of using its own customers to deliver online orders to other customers for a small fee.63

Conclusion
By 2013, Walmart.com and Amazon had spent years in a back-and-forth competitive match as both companies looked to leverage their individual strengths in order to grow online revenues. Challenged in the past by a lack of funding, Walmart.com had finally seized on the imperative to grow and to reclaim much of what Amazon had taken by attracting customers to Walmart’s traditional product categories. Yet, although the company had made great strides, Amazon’s revenues were still eight times those of Walmart.com in 2013.64 Walmart executives wondered if the company was destined to be locked in a back-and-forth battle that might result in only incremental gains without ever being able to take significant points out of Amazon’s market share. In the midst of these challenges, Walmart announced its intention to further embrace the growing trend in China toward online shopping by opening 110 new facilities for shipping online orders. The company simultaneously announced the closing of up to 30 additional brick- and-mortar stores in China.65 Despite these efforts, a crucial question remains: Can Walmart
.com make up for lost time?

References
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2Ibid.
3Ibid.
4S. Banjo, “Wal-Mart’s E-Stumble with Amazon,” Wall Street Journal
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7Ibid. 8Ibid. 9Ibid. 10Ibid. 11Ibid. 12Ibid.

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15Amazon.com, financial statement, fiscal year 2012.
16J. Maguire, “Case Study: Walmart.com,” eCommerce-Guide.com (November 15, 2002), http://www.ecommerce-guide.com/news
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18News Services, “Wal-Mart Sues Online Bookseller,” The Washington Post (October 17, 1998), http://www.washingtonpost.com/wp-srv
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20Walmart Stores Inc., “Walmart.com Adds Nearly One Million New Items with the Launch of Walmart Marketplace” [Press Release] (August 30, 2009), http://news.walmart.com/news-archive/2009/08/31/walmartcom
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21CrunchBase, “Accel Partners,” http://www.crunchbase.com/financial
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22Maguire.
23Ibid.
24Ibid.
25Fortune 500 database, 2002, http://money.cnn.com/ magazines/fortune
/fortune500_archive/full/2002/1.html, accessed October 31, 2013.
26Maguire.
27M. Foley, “Did Walmart’s E-Commerce Stumble Put Its Future at Risk?,” wallstreetcheatsheet.com (June 22, 2013). Available at http:// wallstcheatsheet.com/stocks/did-wal-marts-e-commerce-stumble
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28Ibid.
29Maguire.
30PRNewswire, “Walmart.com and Netflix Announce New Promotional Agreement; Online Retail Companies Team to Promote Each Other’s Core Businesses” (May 19, 2005), http://www.prnewswire.com
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31Amazon.com, “Amazon.com Announces Record Free Cash Flow Fueled by Lower Prices and Free Shipping; Introduces New Express Shipping Program—Amazon Prime” [Press Release] (February 2, 2005), http://phx.corporate-ir.net/phoenix.zhtml?c=176060&p=irol-newsA rticle&ID=669786&highlight=, accessed October 31, 2013.
32Amazon.com, “Amazon Prime Members Now Get Unlimited, Com- mercial-free, Instant Streaming of More Than 5,000 Movies and TV Shows at No Additional Cost” [Press Release] (February 22, 2011), http://phx.corporate-ir.net/phoenix.zhtml?c=176060&p=irol-news Article&ID=1531234, accessed July 31, 2017.
33B. Stone, “What’s in Amazon’s Box? Instant Gratification,” Bloomberg BusinessWeek (November 24, 2010), http://www.businessweek
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34Stone, 2010.
35Walmart Stores Inc., “Wal-Mart Completes National Rollout of Site to StoreSM Service” [Press Release] (July 13, 2007), http://news.walmart
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36Davis.
37Walmart Stores Inc., July 13, 2007.
38M. Boyle, “Walmart’s Magic Moment,” Bloomberg Business-Week
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39M. Boyle and D. MacMillan, “Walmart’s Rocky Path from Bricks to Clicks,” Bloomberg BusinessWeek (July 21, 2011), http://www
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40Boyle and MacMillan.

41M. Brohan, “China Green Lights Wal-Mart’s 51% Stake in Yihaodian,” Internetretailer.com (August 14, 2012), http://www.internetretailer
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42Walmart Stores Inc., “Walmart Announces Acquisition of Social Media Company Kosmix” [Press Release] (April 18, 2011), accessed October 25, 2013.
43F. Manjoo, “Walmart’s Evolution from Big Box Giant to E-Commerce Innovator,” Fast Company (November 26, 2012), http://www
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44Manjoo.
45Walmart Stores Inc., April 18, 2011.
46Ibid.
47Ibid.
48Manjoo.
49L. Heller, “Walmart vs. Amazon: It’s About to Get Interesting,” Forbes
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50Davis.
51P. M. Reyes, “Amazon Goes on a Building Spree,” Bloomberg Business Week (September 2, 2013), accessed October 10, 2013.
52M. Townsend and A. Lutz, “Wal-Mart Shakes Up E-Commerce, Execs Leave,” Bloomberg News (August 12, 2011), http://www.bloomberg
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53“Global Ecommerce Expansion Said to Bedevil Wal-Mart,” LexisNexis (October 3, 2011), accessed October 15, 2013.
54Banjo.
55C. O’Connor, “Wal-Mart vs. Amazon: World’s Biggest E-Commerce Battle Could Boil Down to Vegetables,” Forbes (April 23, 2013), http:// www.forbes.com/sites/clareoconnor/2013/04/23/wal-mart-vs-amazon
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56R. Smith, “Who’s Going to Deliver Your Groceries: Walmart, Amazon, or . . . ?,” Dailyfinance.com (July 9, 2013), http://www.dailyfinance
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57Smith.
58G. Bensinger, “Amazon’s New Secret Weapon: Delivery Lockers,” Wall Street Journal (August 7, 2012), http://online.wsj.com/news/articles/SB1
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59K. Talley, “Wal-Mart to Use In-Store Lockers for Web Order Pickups,”
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60Reyes.
61Bloomberg News, “Amazon Tests Drones for Same-Day Parcel Delivery, Bezos Says,” Bloomberg Technology (December 2, 2013), http://www
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62A. Barr, “Retail Stores Become Shipping Hubs to Battle Amazon,” USA Today (October 6, 2013), http://www.usatoday.com/story/tech/2013/09
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63D. Rousmaniere, “Morning Advantage: Walmart Wants You to Deliver Packages,” HBR (March 29, 2013), http://blogs .hbr.org/2013/03/morning
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64Amazon reported revenue of $74.4 billion, divided by Walmart’s pro- jected 2013 revenue of ~$9 billion.
65Reuters, “Walmart Plans More Stores and E-Commerce in China,”
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