Amazon.com vs. Wal-MartAmazon.com vs. Wal-Mart

E-Commerce Presentation TeamLet’s Get Ready to Rumble!!!!

Let’s Get Ready to Rumble!!!!

•Eric Head•Robert Distefano•Dom Gaudin

•John Lin•Darin Bodin •Carmen Saleh

CEO Jeffrey Bezos

Company Statistics:Company Statistics:

The Amazon Team

Expertise: Expertise: Bits & BytesBits & Bytes

Market Cap: $16 Billion Stock Price: $100 1/16Net Profits: $-138 Million (2Q ‘99)Headquarters: Seattle, Washington

CEO David Glass

Company Statistics:

The Wal-Mart Team

Expertise: Expertise: •Bricks & MortarBricks & Mortar

•Market Cap:Market Cap: $188 Billion$188 Billion•Stock Price:Stock Price: $42 1/4$42 1/4•Net Profit: Net Profit: $4.43 Billion$4.43 Billion•Headquarters:Headquarters: Bentonville, ARBentonville, AR

HISTORIES

History of Amazon.com– July 1994:

• Incorporated• Focus: software development• Sold books in his garage with ten employees

– July 1995: • Virtual doors open

– September 1997:• Introduced personalized recommendations and

one-click purchase

– June 1999:• Obtained 10 million registered customers

History of Amazon.com (continued)

– 2nd quarter 1999 Revenues $314 billion

• 1st quarter 1998 Revenues $87.4 million

• Projected sales for 1999: over $1 billion

– $138 million loss in 2nd quarter 1999

• Has not made a profit since company started

– 10.7 million registered customers

• 8.4 million in 1st quarter 1999

• 3.14 million in 1st quarter 1998

History of Amazon.com (continued)– Operates two international sites:

• www.amazon.co.uk• www.amazon.de

– Other sites operated or owned include:• Gear.com• Drugstore.com• Homegrocer.com• Pets.com• IMDB.com• Planetall.com• Livebid.com• Accept.com

History of Amazon.com (continued)

Mission: To be the world’s most consumer-centric company where people can find and discover anything that they want to buy online.

1962 Company founded in Rogers, Arkansas

1969 Wal-Mart Incorporated

1970 Wal-Mart Goes Public

1979 First Billion Dollar Sales Year

1993 First Billion Dollar Sales Week!

History of Wal-Mart

1988 David Glass named CEO

1991 Established International Presence in Mexico

1995 Established Presence in South America

1996 Entered Asia

History of Wal-Mart (continued)

1997 Largest national employer with 680,000 associates

and first $100 Billion sales year!

History of Wal-Mart (continued)– Originally launched Website in 1996– Owns six registered web addresses:

• samsclub.com • w-mtour.com• samsclubtravel.com.

– Has established alliances with: • Fingerhut• Books-A-Million

– Announced plans for an Internet megasite in 1999!!!

STRENGTHS

Amazon’s Strengths

–E-commerce is its core mission and environment

–Amazon.com has enjoyed a first mover advantage

–Amazon has:

•a strong brand image

•vast customer database

•exceptional customer trust

Amazon’s Strengths

–Amazon provides:

•100% guaranteed secured credit card transactions

•Personalized product recommendations

•Hassle-free shopping through 1-click and 1-bid technology

•Risk-free return policy

–Amazon’s IT and Logistics executives were formerly employed at Wal-Mart

Wal-Mart’s Strengths

– A leader in almost every retail category

– $137.6 billion in sales last year

– $4.43 billion in net earnings

– Excellent vendor alliances

Wal-Mart’s Strengths (continued)

-History and image as a discount retailer

-State of the art supply chain network

-Culture of customer service

-More than 3700 stores worldwide can be used in a “hybrid strategy”

WEAKNESSES

Amazon’s Weaknesses

— Amazon has yet to achieve a profit

—Customers cannot physically touch the product prior to purchasing

—Lack of social interaction before purchasing

—Risk-averse consumers may find buying on-line intimidating

—Not every person has access to the Internet

Wal-Mart’s Weaknesses

– Brand image not attractive to “upscale consumers”

– High fixed costs

– First Web launch was not very successful

– Will a mature and successful firm be willing to make the necessary commitment?!

OPPORTUNITIES

Amazon’s Opportunities

–Expand internationally

–Actively pursue online auctions

–Evolution of mass market from merchant-centric to consumer-centric

Amazon’s Opportunities (continued)–Create “segment fluidity”

•Segments within segments

•Typical segments

–Low cost/value/high quality

•Embedded segments–Customer service

–Product uniqueness

–Social experience

–Quick and easy purchase

–Personalized recommendations

•Catch customers with high attention scarcity

Wal-Mart’s Opportunities

– Exploit vendor relationships

– Establish strategic alliances

– Explore hybrid models to enhance customer service

– Spin off wal-mart.com as a separate IPO

Wal-Mart’s Opportunities (continued)

– Market aggressively using traditional and online media

– Explore hybrid models to enhance customer service

– Do not worry about cannibalization. Use the Internet to expand customer base

THREATS

Amazon’s Threats

– The future of E-Commerce

– Amazon may bite off more than it can chew(over-diversification)

– Other retailers are quickly creating an on-line presence

– Amazon must effectively manage its growth to minimize growing pains

Wal-Mart’s Threats

– Wal-Mart is NOT the first mover. The “wait and see” strategy could be problematic

– Other retailers are getting into the game (Sears, Target, Kmart, etc.)

– Establishing an online brand will cost….the longer the wait, the greater the cost!!

CONCLUSION

Prediction: NO ONE WINNER!

– The Hybrid Model

– Segment “Fluidity” - Attention Scarcity

– Bits & Bytes vs. Bricks & Mortar Analysis

Questions??