If your Internet connection is a bit slower on Wednesday blame Wal-Mart and Amazon. The two retail giants are expected to go head-to-head offering massive discounts to online shoppers throughout the day.
Amazon fired the first shot in the online sales war, announcing last week that to commemorate its 20th birthday it would be offering a global shopping event on its Amazon Prime service with “more deals than Black Friday” in a bid to attract more Amazon Prime subscribers. The company has said it’s planning to offer new sales as often as every 10 minutes on the day.
But what started as an honest bid to increase revenue and market share has turned into an online retail battle for the ages, thanks mostly to Wal-Mart’s track record of direct confrontation with competitors.
In a blog post published on Monday – complete with a confetti-strewn banner – Fernando Madeira, president and chief executive officer of Walmart.com, announced that the company will be crashing Amazon's birthday party by launching its own online sales extravaganza, offering “thousands of great deals” simultaneous to Amazon’s own promotion.
Both the promotion and the post are aimed directly at Amazon. The flashing banner above the post reads “You shouldn’t have to pay $100 to get great deals,” a reference to the $99 membership fee for Amazon Prime, which then gives subscribers access to more discounts.
“On July 15th (and every other day) enjoy low prices at Walmart,” the banner adds.
In his blog post, Mr. Madeira writes: “We’ve heard some retailers are charging $100 to get access to a sale. But the idea of asking customers to pay extra in order to save money just doesn’t add up to us.”
In addition to offering sweeping discounts on Wednesday, Wal-Mart has also cuts its minimum purchase cost for free shipping from $50 to $35 – the same as Amazon’s free shipping option.
If it’s a surprise to see two corporate giants taking each other head on – Forbes described the e-conflict as Goliath vs. Godzilla when it started in 2013 – that’s because online shopping is one area that Walmart has not been performing well in.
While Amazon is the world’s largest online retailer, Wal-Mart is the world’s largest retailer of any kind, pulling in $469 billion in revenues in 2012 compared to $61 billion for Amazon, according to Forbes. Still, in 2013 the Bentonville, Ark.-based chain targeted $9 billion of overall revenue for the year to come from online sales, only 2 percent of its overall sales. The company targeted a 30 percent growth in global online sales last year, but fell short at 22 percent, pulling in $12.2 billion in revenue, according to MarketWatch.
But the company recognized the growing importance of the online sales market. According to Nielsen, e-commerce will grow faster than any other segment of the retail industry in the coming years, Forbes reported, growing by 11 percent each year through 2017. Brick-and-mortar shopping centers are projected to grow at half that rate, Forbes added.
Perhaps more annoyingly for the retail giant, a UBS study last year, citing Kantar Retail data, found that most in-store Wal-Mart shoppers preferred shopping online at Amazon, MarketWatch reported last year.
So faced with possibility of falling behind in a key retail sector, Wal-Mart followed a tried-and-tested formula: going to war with its biggest competitors.
Last year, in response to a big Black Friday sales campaign from Target, Walmart launched its own raft of discounts that matched its competitors almost item-for-item in a “pre-Black Friday” sale.
Still, industry observers say Walmart has a long way to go to make up ground on Amazon Prime. Matt Nemer, a senior analyst for Wells Fargo, wrote in a note to investors that Amazon Prime “will continue to push the envelope on shipping speed and add new services,” according to CNN Money.
“Walmart will have heavy lifting ahead to catch up with Prime ... ” he added.