US antitrust law was not designed for such companies and so far has not stretched to include them.

US Antitrust law was established to address the Rockefeller’s, not the Bezos’, I think I’m safe in saying.

However, let’s keep in mind that “WE THE PEOPLE” ultimately have control over the Amazon behemoth. And with that in mind, this interesting little ditty came across just yesterday:

To summarize, almost all financial pundits viewed the Whole Foods acquisition by Wal-Mart to be “Look out, Wal-Mart, Amazon’s coming after you”.

HOWEVER, Goldman-Sachs, who are universally considered to be the Smartest Guys In The Room on Matters Economic, saw it differently. They saw it as an admission by Bezos that Amazon cannot continue to grow without resorting to brick and mortar.

And if you’re going to play Wal-Mart on their home field……look out. Several reasons:

  • Let’s make sure everyone first knows that as far as retailing is concerned, Wal-Mart is till the reigning behemoth in the room:
  • Wal-Mart has more developed product sourcing in developing nations than Amazon does, who so far have been buyers rather than investors in those product sources. This may or may not be of economic advantage to Wal-Mart; but it’s certainly not a disadvantage.
  • Wal-Mart’s ability to flatten their supply chains and avoid inventory carrying costs whilst keeping the right stuff on the right shelf at the right time is the stuff of B-School legend. Literally. In fact, Amazon carries books about it. Wal-Mart excels at this, both technologically and as art; it cannot be easily reproduced, as the impending demise of KMart, Sears, and Penney’s illustrate. Big advantage here to Wal-Mart, as Amazon has only addressed supply chain issues by pushing the responsibility to the manufacturer via drop-shipments.
  • Wal-Mart owns it’s own mature logistical network which is fully integrated with its supply chain technology. Amazon depends on third parties such as UPS and the US Mail. This is more costly, and means that the logistics are outside of Amazon’s control.
  • In-store efficiency. Wal-Mart, again, has got this art down to a science. Amazon has no experience with this; however, this particular experience is easier to hire than supply chain and logistics experience. Advantage Wal-Mart, but probably not a substantial one.
  • Retail Network. Wal-Mart has (with Sam’s Club) approximately 4750 retail outlets in the US, most strategically located in highly dense middle-income areas, and an extremely high penetration of total retail business in rural America (which is how they destroyed established competitors like KMart, Sears, and Penney’s, back in the 70's). Whole Foods has about 430 stores, most located in areas trafficked by higher-income consumers, and no penetration outside of major urban areas.

So, the above represents the case for brick-and-mortar superiority. But, what about Amazon’s obvious advantages in on-line business?

Well, if you look at brick and mortar vs online business, the hard part is doing brick and mortar well. Selling over the internet is not so complex nor artful; it’s really just technology. This is well demonstrated by the fact that pretty much anyone with a bright idea these days (just watch Shark Tank) starts off by selling over the internet.

Selling on internet…, easy. Finding shelf space, getting shelf space, moving product, stocking shelves…..not so easy.

What’s not so well documented (Amazon is cool, WalMart is boring, after all) is the inroads Wal-Mart is making in the online space.

63% quarter over quarter growth in e-commerce is…..substantial, and a lot faster than Amazon’s growth, although Amazon is obviously the ecommerce beheamoth; and, Wal-Mart’s online inventory is still only a third of Amazon’s….although you still have THOUSANDS of options on Wal-Mart’s site for most common products.

Finally, there remains the rather hard-to-quantify advantage (or not!) that Wal-Mart might have through ship-to-store (which is more “free”, than Amazon’s method, which simply bundles the cost of shipment into the cost of the product for different customers based on volume) and the ability to return-to-store. Again, it’s not clear if those are advantages to Wal-Mart or not, but they are certain not disadvantages.

In the end, it should be interesting. My view is that it’s probably best if people don’t dance on Wal-Mart’s grave just yet.

Data Driven Econophile. Muslim, USA born. Been “woke” 2x: 1st, when I realized the world isn’t fair; 2nd, when I realized the “woke” people are full of shit.

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