Of course, Wal-Mart has been a behemoth for decades, already contributing to the reinvention of American retailing. Jeff Bezos, meanwhile, has been building Amazon into a powerhouse as well, but it’s only in recent years that the online empire has set its sights on fashion.
But now the two giants are clearly targeting one another — and each has its advantages. Wal-Mart’s sales are almost four times bigger than Amazon’s — while its profits dwarf those of the e-tailer. Wal-Mart each week attracts more than 260 million shoppers to its 11,600 stores in 28 countries.
But Amazon has pole position in the digital race with the skills and technologies to keep revolutionizing the sector. It has as more than 600 million items on its platform, 8.5 times the 70 million Wal-Mart carries online.
Each made major moves this year to shore up their positions.
Wal-Mart bought Jet.com for $3.3 billion and empowered its founder, Amazon ex-pat Marc Lore, as head of its e-commerce business, to buy Shoes.com, Moosejaw, Modcloth and, in a $310 million deal revealed in June, Bonobos.
Bezos and crew have responded by buying Whole Foods Inc. for $13.7 billion in cash, a deal that was revealed the same day that Wal-Mart unveiled the Bonobos transaction, causing some to speculate that Seattle was not ready to cede the spotlight to Bentonville for even a day.
In fashion, Amazon also had a flurry of activity, from a bigger push into private-label apparel, to the home try-on service Prime Wardrobe and the AI- and stylist-powered Echo Look, which both takes photos with voice commands and offers style advice.
“Clearly Amazon and Wal-Mart see each other as a threat, and they are both moving to put stakes in the ground in each others’ territories,” said Richard Kestenbaum, an investment banker at Triangle Capital. “They both have different approaches, based on their different histories and resources, even though both have enormous financial scale.
“It will be many years before Amazon or before Wal-Mart will vanquish the other,” Kestenbaum said. “And there will be many, many changes that will take place. We will probably never see one be the winner or one defeat the other.”
A key question is how serious of a fashion player either can — or wants to — be. Wal-Mart in brick-and-mortar has had mixed success in fashion, repeatedly refocusing its business on basics. But online it seems to have broader goals.
Amazon, meanwhile, also has had mixed success in fashion, but continues to make inroads into the category. Simeon Siegel, an analyst at Instinet, said Amazon’s apparel business, by gross merchandise value, could be in the neighborhood of $18 billion to $36 billion, and is on its way to $45 billion to $60 billion in 2020.
In short, Siegel argued that Amazon can not only take on fashion, but has experience making similar takeovers.
“Amazon’s success with books offers [an] interesting proxy,” Siegel said. “Amazon’s path to book dominance provides a potential roadmap for apparel success, with its 2007 media progress sharing similarities to its apparel achievements.”
While many in the fashion industry discounted Amazon or underplayed the threat for years, now most are either trying to stay out of the e-commerce king’s way or to reach some sort of peace.
Kohl’s Corp. is accepting Amazon returns and selling its electronic products, for instance. And even the mighty Nike Inc. capitulated in a way, agreeing to test a limited assortment of Nike products through Amazon in hopes of cleaning up the brand’s presentation on the site, which had been dominated by third-party sellers.
Amazon expanded its Prime same-day and one-day delivery services to more than 8,000 U.S. cities last week, while Prime Now grocery is available in 30-plus cities, where expedited options include delivery for holiday orders as late as 11:59 p.m. on Christmas Eve. Interesting timing, considering the pitched battle being waged over delivery, which was intensified by Target Corp.’s $550 million acquisition of same-day delivery platform Shipt revealed Wednesday. It indicates that having instant or same-delivery is now table stakes for retailers.
While Amazon is known for thinking new and moving fast and taking on fresh sectors with an often terrifying abandon, one key consequence in retail has been to awaken Wal-Mart, which is now on the move in a major way.
As head of Wal-Mart’s e-commerce efforts, Lore has spearheaded efforts around last-mile delivery, shipping online orders from stores, offering consumers discounts for picking up orders in stores and simplifying the returns process. Wal-Mart is also bringing voice shopping to Wal-Mart consumers through a deal with Google that takes on territory Amazon is staking out with its Alexa assistant.
Lore was also instrumental in launching Store No. 8, an incubator intended to develop technology in areas such as virtual and augmented reality and personalization that could significantly impact retail in five years. Looking farther ahead, delivery solutions including autonomous vehicles and floating warehouses that deliver via drone, could be in the offing.
Wal-Mart sits on a $3.2 billion pile of cash from operations, and continues to log revenue increases in the U.S. — $3.2 billion in the third quarter alone — and Amazon has posted only a handful of profitable quarters ever.
“Looking ahead, we’ll continue to invest in and strengthen our stores around the world and expand our e-commerce capabilities as we help save customers’ time and money,” said Wal-Mart ceo Doug McMillon, who recently announced a deal to offer Lord & Taylor dedicated space for selling apparel on the Wal-Mart web site. “It’s a great example of how we’ll be creating specialty experiences that complement what we offer, and serve customers with the brands they want.”
It’s still uncertain just how far the battle between the two firms will spread.
Mortimer Singer, chief executive officer of Traub, said: “An interesting question is, do they still see themselves as mass-market businesses? I don’t think they do. I think they’re both trying to provide value across the value chain and up the demographic ladder. There are really no channels any more, it’s all about the customer, and you can speak to a mass-market customer and a luxury consumer now.”
But that highlights what could be a deciding factor in the battle between the two Goliaths — brands. Both companies want to grab customers with the strongest and buzziest names and both have had trouble attracting them.
Many fashion and retail brands are still sitting the sidelines. But like Nike and Kohl’s and Lord & Taylor, they might eventually have to pick sides.