Our read on Amazon vs. Wal-Mart: Books matter less and less
Filed under: Technology, Investing, Home Depot, Wal-Mart Stores, Amazon.com, Inc.
When Amazon (AMZN) locked horns with Wal-Mart (WMT) in a price war over books, pundits worried the online retailer would get seriously bloodied by doing battle with the deep-pocketed retail giant. Amazon is, after all, first and foremost a bookseller. Any frontal assault on its book-selling niche would do serious balance-sheet damage, the theory went. I knew this theory was wrong from personal experience. Amazon's blowout quarterly numbers and impressive forward-sales guidance, reported on Thursday, validated my belief. On the earnings calls, Amazon Chief Financial Officer Tom Szkutak told analysts that much of Amazon's growth was coming from electronics and general merchandise. That mirrors the spending trends in my own home. In the past month alone, a significant portion of our offline spending went online to Amazon.
Let me break it down. Yes, much of that spending was in consumer electronics. I purchased a new scanner and a new Bluetooth headset for my cordless phone. I also sprang for a new battery for our iRobot (IRBT) Roomba robot vacuum cleaner. I have long been purchasing consumer electronics on Amazon. But lately it has become the first stop.
That's due partly to convenience, but also due to Amazon Prime, the wonderful service that gives expedited (usually second- or third-day free shipping on many products to customers willing to pay a flat annual fee of $79). Of course, I also own a Kindle and pay monthly subscriptions for media (although I may swtich to a Sony Daily Edition).
So I'm spending more on Amazon for consumer electronics. I'm also spending a lot more there -- surprise -- on groceries. My wife has strong preferences for more environmentally friendly options such as Bio-Kleen laundry detergent and Ecover stain remover. On Amazon, I can order those products in bulk and at discounts of roughly 20 percent to our local bricks-and-mortar supermarket. Plus, we don't have to lug them home.
But wait. Amazon also offers a subscription option that gives you a 15 pecent discount on grocery products that you agree to put on automatic reorder. The intervals can range from one month to six months. So with that added discount, the actual price of the product is 35 percent below what I pay at the store. Even better, these products are delivered to my doorstep and I never have to think about buying them again. The net gain for Amazon, out of our monthly spend, is probably $150 on grocery products.
It goes beyond groceries. We wanted an entry-level portable basketball unit for our driveway. We called several sporting goods stores near us, including a Big 5 Sporting Goods (BGFV). All were charging more than Amazon. None would assemble the hoop for us. All required we drive to the store. Amazon was cheaper and delivered. Guess who got the $120 for our new hoop?
And so it goes. Smoke detectors and batteries? Amazon and free delivery three days later. I could have gone and shopped around the Internet and probably found it cheaper -- maybe even with free shipping. But then I'm entering all my new credit card information and figuring out what free shipping means (Is it three days? Is it two weeks?) is a royal pain.
I could drive to a store, sure. But no one likes calling Wal-Mart, HomeDepot (HD) or other places, getting put on hold for minutes until someone -- who or may not be qualified to answer the question -- picks up. Both stores offer buy-online and pickup in person options, which, for same-day needs, I may take advantage of.
But my extra time driving, plus the costs of gas, means adding a significant amount of money to what may be a fairly minor purchase. Amazon Prime is also not a lot of money to pay for the convenience and faster shipping (It can also be shared among family members with different Amazon accounts -- a huge plus).
In this light, the clearest competitor to Amazon right now is Wal-Mart, which has done a bang-up job with its own e-commerce website. Still, product offerings are very limited compared to Amazon. Wal-Mart has not simplified its shipping costs structure, a necessary step for any company hoping to become a broad-category e-commerce killer like Amazon.
To be sure, my family may be on the leading edge of consumer behavior. A focus group of one family is a risky metric for broad extrapolation.
But I firmly believer there are enough of us around to make a difference for Amazon. When I tell others of my Amazon experience, I find that at least one-third of my peers are doing the same thing: buying groceries or other items at Amazon and shopping well beyond the mainstay categories of books and consumer electronics.
In a time of tight economics and people working two and three jobs to make ends meet, time becomes an even more important commodity. If we can get time and cost savings wrapped in the same package, then its a grand slam sales pitch. Bezos has pushed my hot buttons and that's why books no longer are the bellwether for Amazon.
Alex Salkever is Senior Writer at AOL Daily Finance covering technology and greentech. Follow him on twitter @alexsalkever, read his articles, or email him at alex@dailyfinance.com.
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Reader Comments (Page 1 of 3)
10-23-2009 @ 2:40PM
otrpu said...
When I worked at WallyWorld I doubted most their customers could read English, may be quite a market for Spanish books though.
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10-25-2009 @ 2:08PM
bob said...
1st walmart is a piece of sh!t. they don't even have good sleection of cds, games, or any electric for that matter. books i could care less about them. if they do have a cd there i owuld like its edited sh!t cus of family value. walmart just needs to go away they're becoming corperate nazis oh wait they're already are.
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10-25-2009 @ 5:43PM
Guillermo Sanchez said...
You should try to type your comments in English.
10-25-2009 @ 5:59PM
babsg2003 said...
Hey Bob! I don't know about everyone else, but I am shocked that you don't care about books.
10-25-2009 @ 2:19PM
XXXXXXXXXXXX said...
Wow, Bob. I think you just proved OTRPU's point. Nice command of the English language, grammar and spelling.
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10-25-2009 @ 3:59PM
slinky said...
yup!
10-25-2009 @ 2:36PM
momof4 said...
Wow - I was surprised to see a mirror of our amazon loyalty! I can find quality anything amazon. My daughters are size 0. Try finding a solid white formal in a size 0 at any retailer and if you do find it, it won't be without paying 200 dollars. I found it on Amazon, good quality, fast shipping, perfect fit - 65 dollars! Likewise with camping gear. Our son, hiked the Appalachian Trail. All his equipment, tent sleeping bag, etc., came from Amazon! Name brand, 1st quality, less money. No traveling from store to store, or driving to the larger city to locate supplies. Amazon is my 1st point of shopping for anything! Don't even get me started on Christmas shopping! Anything hard to find, I've found on Amazon!
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10-25-2009 @ 3:06PM
will said...
HEY! I gotta 8 point buck!!
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10-25-2009 @ 3:07PM
LST said...
I've recently began buying from Amazon, have placed three or four orders thus far, and I'm greatly surprised at how fast they ship it out, sometimes just hours after I placed the order. Try and get good serice at your local Walfart store, they seem to hire idiots who move in two speeds; slow, and stop! I'll stick with Amazon for books, DVDs, and a lot of other things, and happily avoid going to Walfart...
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10-25-2009 @ 10:19PM
Gary K said...
I've shopped on and off at Amazon.com as I do at Walmart and push comes to shove I'd rather purchase from Amazon anytime. The only advantage Walmart gives me is if I had to return the item I can usually do it at my local Walmart without having to ship it back. I also like being able to see if someone has it used or remanufactured for a much better price, meaning more savings for me. I haven't considered Prime before but I suppose if you buy a lot then it does make it worth while.
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10-25-2009 @ 3:23PM
Rich said...
Ever since I started using Amazon about 2 years ago, I have stepped in walmart(pain in the butt to shop), best buy(overpriced and hate people trying to sell me things/add-ons I dont need), etc about 2 times...I have found nothing but great deals on Amazon...A camera, $50 cheaper than anywhere else, GPS $50 cheaper than anywhere else, books at prices better than everywhere and prime is the best $79 I spend on a yearly basis...Amazon is my favorite store and probably the best one out there!
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10-25-2009 @ 3:29PM
Trai said...
Amazon all the way! Here's what you deal with... If you go to Books-A-Million, you have to deal with all the weird pedophiles and goth people, and if you go to Walmart, you have to deal with all of the trailer trash, with screaming children wearing nothing but a diaper. I prefer Target and Barnes and Noble if I have to choose a Brick & Mortar store. Amazon is the best of all!
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10-25-2009 @ 3:25PM
AP said...
I'm sorry some of you feel that way about Walmart. When I needed a job, they gave me one. I'm having a problem understanding wanting to pay higher prices for anything, but if that's how you feel, then by all means go elesewhere and pay higher prices for the things you want. My current bottom line at the end of the day is saving wherever I can on whatever I can...and if that's hard for some of you to understand, then I can't help you. I shop both amazon.com and walmart.com. I've found great deals on a lot of things at both sites. I see no need to spend a lot more money than I have to on anything. If you have all that extra money just sitting there, send it to me, I won't mind at all!
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10-25-2009 @ 3:28PM
Tammy said...
I absolutely LOVE Amazon Prime. We moved to a very small town a couple of years ago and when I need to find something that isn't offered locally, Amazon is my first stop. Free shipping, great selection, not having to leave my chair...What could be more convenient than that?! I also had everyone in my family set up wish lists and it makes it SO easy to shop for them. Yay Amazon!!!
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10-25-2009 @ 3:39PM
will said...
I love walmart! I buy all my guns and ammo there. GREAT prices!! I hate all those HIGH priced YUPPY stores.
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10-25-2009 @ 4:47PM
Justin said...
Will, can anyone be so ignorant? Oh yes, the average walmart customer can. If you are content to support an economic terrorist then go ahead. If you enjoy putting tens of thousands of U.S. factory workers out of work and moving those jobs to asian sweat shops, yes go ahead and shop at walmart. BTW genius, what do you think will happen to your low prices when walmart no longer has competition? You will be forced to pay whatever they wish to charge you.
10-25-2009 @ 5:46PM
Carl Bales said...
Well Said Will. Slinkie sounds like one of those radical union idiots, as opposed to a rational union person.
10-25-2009 @ 3:45PM
Ryan said...
Wait, Amazon has an automatic reorder program? I dug around and couldn't find it. I know Amway global has an autoshipment program called Ditto, and I thought they had a patent on it.
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10-25-2009 @ 3:49PM
paulz said...
I spent more money at amazon last xmas than anywhere else and will again this year
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10-25-2009 @ 3:53PM
Mikeytron said...
Basically you should not buy anything from Walmart. They are terrible in every way. Companies like Amazon have always been customer oriented. If you keep buying from the Walmart Big Box you get what you deserve. I don't care if I pay a little bit more, and in fact after Walmart settles in THEY become the higher price or you pay the same for terrible customer service and you walk 10 miles to buy a video.. This is exactly what they want. To treat us like sheep and puppets. For us to THINK that Walmart is the ONLY WAY. Now they are trying to get their website up to the standards that many others have had FOREVER. How many times have you looked at prices at Walmart.com only to go to a store and find out the price is much higher. Only now Walmart is placing disclaimers that pricing online is different than in stores. Best Buy has always been good in this area. You can check stock and the online price is the store price. Walmart is dead to me. They hurt their communities more than they help. Its their way is the ONLY WAY! Target is better in every way than Walmart!
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