Amazon (NASDAQ: AMZN) should be concerned. Walmart’s (NYSE: WMT) resources are enormous. That gives Walmart time to work on their blind spot. Does Walmart leadership understand what makes Amazon so strong? Probably not. If they do, can they adopt it?
Walmart is changing quickly. We’ve all seen all their ecommerce acquisitions and a lot of new initiatives they’ve launched and tested in the last few months. These included Bossa Nova robot in stores, Mobile, Express Returns, Scan & Go, Check Out With Me, and JetBlack premium membership.
Walmart is still the largest retailer by volume. Walmart has stores within 20 miles of 90% of Americans. Yet, they correctly perceive Amazon, and others as a threat.
This image from their shareholder meeting that was shared by Lauren Thomas from CNBC summarizes their concern:
Walmart doesn’t want to end up like Sears. However it might.
For all Walmart’s “digital transformation”, their ecommerce growth slowed down this quarter. Amazon continues to outperform expectations.
Let’s look at two similar initiatives from Amazon and Walmart to understand the differences.
Testing Walmart’s Scan & Go vs. Amazon’s Amazon Go
Cashier-less checkout was a big theme at ShopTalk. Nordstrom, Macy’s and other retailers are focusing resources to reduce this friction point.
Walmart executives presented their Scan & Go initiative at ShopTalk this year. Amazon launched Amazon Go in Seattle and is expanding. In e-commerce, retailers can either help customers increase their motivation or decrease the friction they encounter during a purchase. In retail, checkout has always been a significant source of friction. No one likes to wait.
Walmart’s Scan & Go Test
In January 2018, Walmart announced the expansion of their Scan & Go cashier-less checkout experiment to 100 stores.
Their promotional video looked promising:
This is how it actually worked.
The demo was “smoother” than the actual experience. During the test shoppers could use their phones with a mobile app or a separate device Walmart provided. As you walked through the store you scan the items added to your physical shopping cart. Then shoppers advanced checkout at a special lane near their current self service checkout.
The Scan & Go initiative was cancelled. Walmart executives said they did learn from it.
What did Walmart learn? It seems like they were asking: If you reduce the friction in checkout will you sell more? No surprise! They likely weren’t impressed with the results of their test.
Walmart essentially moved an already not super popular self checkout scanner onto a mobile device. Self-checkout is an extra job for the customer no matter what part of the store they do it in. They tested the same concept but moved it to a different location in the store.
Walmart tested a variation of what they were already doing. Tweaking, improving and optimizing variations leads to a local maxima, a dead end.
Let’s examine how Amazon approaches tests to see what we can learn about innovation and testing.
Amazon Go didn’t waste time and resources testing variations. They tested a variable first.
Amazon knows that customers don’t like to wait. It’s something that will never change.
“ I very frequently get the question: ‘What’s going to change in the next 10 years?’ And that is a very interesting question; it’s a very common one. I almost never get the question: ‘What’s not going to change in the next 10 years?’ And I submit to you that that second question is actually the more important of the two — because you can build a business strategy around the things that are stable in time. … [I]n our retail business, we know that customers want low prices, and I know that’s going to be true 10 years from now. They want fast delivery; they want vast selection. It’s impossible to imagine a future 10 years from now where a customer comes up and says, ‘Jeff I love Amazon; I just wish the prices were a little higher,’ [or] ‘I love Amazon; I just wish you’d deliver a little more slowly.’ Impossible. And so the effort we put into those things, spinning those things up, we know the energy we put into it today will still be paying off dividends for our customers 10 years from now. When you have something that you know is true, even over the long term, you can afford to put a lot of energy into it.” ― Jeff Bezos
Amazon innovates with a central purpose – making things better for the customer.
Amazon, and anyone who visited a store with cashier-less checkout knows, that people aren’t excited about taking over the cashier’s job. You can see that in every grocery store, Walmart, Lowes and Home Depot that have longs cashiered lines and a handful of people struggling at the self checkout. For stores with higher margins sales people can take over the cashier’s job for the convenience of customers.
Amazon, understood that “checkout” is a lousy experience. Checkout is the variable to test.
Amazon didn’t ask how to improve checkout. They asked: would people buy more if they didn’t have to use checkout at all?
Amazon decided to innovate around replacing the checkout experience. Ironically, it was so successful that there were lines of people to try the experience for themselves.
Amazon proved that customers love their no checkout innovation. Only now will Amazon will test many variations to improve on the concept.
Walmart has a serious blind spot
Walmart focused on optimizing store operations with technology.
Amazon focused on innovating on behalf of their customers.
Walmart doesn’t understand that they don’t have an ecommerce channel problem, Walmart’s problem isn’t Amazon. It isn’t even technology. Walmart’s problem is a blind spot, a lack of interest in who its customers are. Walmart is struggling to transform from being experts in products, inventory management, supply chain, and logistics to becoming experts about their customers.
To succeed in retail today you need to start with the customer, not the product.
Amazon is beating Walmart, and others, because it knows its customers and takes as an article of faith that if they do right by customers they will succeed.
How about you? Every successful business has a blind spot!
Here’s what often happens:
A business has a unique approach, or a special emphasis that separates them from competitors so they commit to it. It makes them successful.
They eventually reach a plateau.
Most businesses double-down on what brought them success.
They do what they know how to do and improve on the margins. They press down harder on the accelerator..
They get stuck in that gear.
At first their innovation gave them momentum.
And then things began to level off.
They believe in first gear. First gear is where they feel comfortable.
Metaphorically, Walmart is accelerating in first gear.
Businesses don’t have automatic transmissions! All you have to do is look at the top retailers slide at the beginning of this post.
Few companies ever find second gear.
Let us know if we can help you eliminate your blind spot. Let us work with you to innovate your way to success by reducing customers’ friction and increasing customers’ motivations.
