As we continue to move full speed into the final days of the holiday shopping season, there have been many interesting headlines surrounding the battle between retail giant Walmart, and the little engine that could, Amazon. I didn’t realize the history behind this epic battle that has been waging on for more than a decade. A little like the Hatfields and the McCoys, these entities have been duking it out for what is comparable to centuries in internet years.
Recent updates to the feud have the two companies in a price battle over everything from new books to Easy-Bake Ovens. Just before this year’s Black Friday, Walmart reduced the price of the Easy-Bake from $28 to $17, with Amazon responding that same day, dropping their price from $28 to $18. The same thing is happening with DVDs, video game consoles, mobile phones, and any other product these two companies have in common.
While online shopping is said to account for only about four percent of all retail sales, that number is destined to grow exponentially. With more and more people gaining access to broadband internet, reduced skepticism over the security of online purchasing and the falling prices of PC equipment, many more of today’s shoppers are embracing the internet as their main source for product ideas, reviews, comparison shopping and eventually, purchasing. And this trend is proving itself to be true. During the economic downturn, eCommerce wasn’t as heavily impacted as brick and mortar retail sales, and Amazon even saw a 24 percent increase in sales during the third quarter of 2009.
Walmart’s revenue has grown 9.1 percent per year (averaged over the past three years) in comparison to Amazon’s 31 percent increase per year. And while Amazon’s annual $19.2 billion in revenue is still dwarfed by Walmart’s $400 billion, the tortoise will eventually catch up and beat the hare in this race of time.
Utilizing these annual revenue figures and the current growth trends extended over time, the graph below visualizes when Amazon’s revenue will match that of Walmart, given that all other variables remain the same.
Things to consider that could affect the trends:
- This graph is a comparison of the average growth of these two companies, based on today’s estimate that online shopping accounts for only about four percent of retail sales. What if that figure grew to 10 percent or 25 percent some day?
- Currently, Amazon’s customers do not pay sales tax in most states. Meanwhile, lobbyists for Walmart and other retail chains are trying to eliminate this disadvantage these brick and mortar stores are facing.
Your business can learn a lot from these game changing enterprises. You don’t have to be Amazon or Walmart to reap the rewards of increased sales and exponential growth. While Walmart is still expanding globally, relying mostly on their brick and mortar stores, Amazon has built their business on an online foundation and continues to experience exponential growth as the future of the internet grows around them.
You don’t need to be a Fortune 500 company with a Fortune 500 budget to be a successful online retailer. A smart investment in online marketing paired with constant monitoring and optimization can now afford you a chance to compete with larger companies. SEO, PPC, Social Media, Display Advertising, Digital PR, Creative Services, Mobile Websites & Campaigns, Search Analytics, Podcasts, Consultation Services or a whole new website based on a solid SEO foundation can all lend a hand to help land you where and when your future customers are looking. Look to Oneupweb if you want the best, and let us grow your business. After all, it’s what we do.
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As Walmart and Amazon continue to intensify their battle, it’s interesting to imagine how the they’ll impact the paid search cost environment. Recently, in the past four weeks, we’ve seen Walmart step up its aggressiveness within the Pharma paid search PPC space, expanding its target keyword list to a broader range of prescription medications. I’m not sure if Walmart knows something that the rest of us don’t know regarding the upcoming healthcare reform bill, but they seem to be increasingly focused on locking in prescription med customers online. This is impacting the cost per click (CPC) that pharma brands pay to educate current and prospective prescribers. If/when Amazon enters this space, we’d likely see continued pricing pressure on pharma SEM costs per click. I wonder: what are the opportunities for pharma brands to partner with online pharmacies in the PPC space?
I’ve heard more than once that companies like these, which invest probably millions in search marketing per month, don’t pay on the bidding like the rest and are somehow given a bulk rate. Couldn’t offer more than that, but it would seem likely as it would be next to impossible to manage a campaign the size they run. I bet ebay gets this options too. But not many.
Ian –
Thanks for the comment about Walmart stepping up their aggressiveness within the Pharma paid search space. I was curious to see how big they were playing in the PPC ad arena, so I ran a quick Google search for the Top 25 prescription drugs dispensed, according to rxlist.com. In my results I found that Walmart.com had Top 3 Paid Ad Placement for 12 out of the Top 25, and most of the ads had an attractive tag line that read “Get “_________” for Less”. However, the other top contenders I kept seeing were CanadaPharmacy.com and CanadaDrugCenter.com, which had me wondering if prices for prescription drug prices were cheaper in Canada, or if there were less restrictions about the ordering/delivering process?
It will be interesting to see if/when Amazon.com gets involved with the pharmaceutical product industry, and how that will impact their current product price war. Also, if they will consider partnerships with these pharma brands or online pharmacies as featured merchants within this PPC space.
online branding blog -
Thanks for your comments. I haven’t read or found any documentation about PPC bulk rates, but I agree it would be quite a challenge to manage a campaign that size – even by some online marketing companies that might rely on automated systems to auto pilot a client’s account. Please let me know if you or anyone else out there hears of any information if/how large companies might be utilizing bulk rates for paid accounts with million dollar plus spends. Inquiring minds want to know…
Interesting article on the topic of your blog. It reveals that Walmart.com’s holiday sales are growing two or three times faster than Web sales overall! Check it out! http://www.record-eagle.com/business/local_story_353232122.html