Global Brands: Online retailer Amazon grabs top spot from bricks and mortar rival Wal-mart

May 20, 2013 11:59 pm

Global Brands: Online retailer grabs top spot from bricks and mortar rival

By Barney Jopson

Calling Amazon the “Walmart of the web”, a common moniker for the online giant, is one way to make people from Walmart bristle. The bricks-and-mortar behemoth tends to think that if any company is going to be the Walmart of the web, then it should be Walmart.

That is why, after several false starts, the 50-year-old retailer from Arkansas is in the throes of its latest – and most serious-looking – effort to build a substantial online business. The results will help shape the evolution of the Walmart brand for years to come (as will the progress of its international bricks-and-mortar business).

But the 2013 BrandZ Top 100 ranking shows that Amazon still has more momentum. For the first time since the ranking began, Amazon, founded in 1994, has leapfrogged Walmart to become the most valuable retailer in the rankings: a 34 per cent rise in its brand value to $45.7bn lifted it to position number 14 overall.Walmart kept growing, too, but in spite of a 5 per cent rise in its value to $36.2bn it slipped one place down the table to 18.

The tussle between the two – the superstore from backwoods America and the tech-whizz from waterfront Seattle – is the biggest rivalry in global retail. And because they have such distinct approaches it will have a defining impact on how shopping evolves: outside their home US market, Walmart and Amazon compete head-on in the UK, China and Japan and both are inveterate expansionists.

While Walmart’s core US customers typically have a household income of between $30,000 and $60,000, Neil Ashe, chief executive of Walmart ecommerce, told the Financial Times in March that he was also going after wealthier customers, which Amazon knows well. “We can get to every customer in the world via ecommerce. It doesn’t matter where they live or how much they earn.”

Amazon is still considerably smaller than Walmart. Analysts expect the online retailer to generate sales of $75bn this year, while Walmart is forecast to sell $492bn of goods. However, Walmart’s forecast for its online-only sales – more than $9bn – is less than 2 per cent of its expected total.

Walmart’s ecommerce success will depend partly on whether it is right in one conviction: that fusing digital assets with bricks-and-mortar shops will give it an advantage over online-only rivals at a time when the speed and cost of deliveries is crucial.

It boasts that it can use its 4,000-plus US stores as warehouses to fulfil online orders quickly. But Walmart faces the difficult job of grafting new ecommerce systems on to its legacy store software systems. Training shop workers to pick and pack online orders while also doing their current jobs is no easy task.

Amazon is no longer the “pure play” internet business it once was. Jeff Bezos, its founder and chief executive, said last November that it would “love to” open physical stores if it could make them distinctive, but the real blurring of the boundaries between the physical and the digital comes with its warehouses.

Amazon has always needed them, but it has been on a building binge since 2010. It will always have far fewer warehouses than Walmart has stores, but Amazon’s bet is that the most efficient way to reach consumers is from storage facilities that are huge and specialised, not midsized and multipurpose.

Consumers have more “emotional attachment” to the Amazon brand than Walmart, according to the BrandZ ranking, and David Roth, chief executive of the global retail practice at WPP, the world’s largest communications services group, links that to the nuts-and-bolts of its reliable delivery system. “The lesson Amazon teaches us is that meeting your promises is a way [to make] people feel emotionally good about you … Consistency is the essence of a great brand and Amazon is very consistent,” he says.

Walmart and Amazon differ in their approach to customer loyalty in other ways. Walmart says the best way to foster loyalty is to offer the lowest prices – which partly explains why it has not introduced loyalty card programmes similar to peers such as Tesco of the UK and the US’s Kroger.

Frugality and low prices are virtues Amazon learnt in part from Walmart.

But Amazon has developed more elaborate ways to promote loyalty. Its Prime programme gives customers unlimited free delivery for $79 a year (in the US), and its Kindle devices tie people into its digital “ecosystem”.

Amazon has also made great use of its data trove on online shopping habits to shape its merchandising and marketing. Walmart, meanwhile, is trawling Twitter, Facebookand Pinterest for insights.

Mr Roth says an ability to organise and analyse data will separate the winners from the losers. But the question of which kinds of data will prove to be most valuable remains unanswered. “I don’t think Amazon is surpassing Walmart never to be caught again. This is a cat-and-dog fight.”

Retail bricks and clicks
Rank change	Rank 2013	Brand	Brand value 2013 ($m)	Brand value 2012 ($m)	% Brand value change 2013 vs 2012	BC index
1	1	Amazon	45,727	34,077	34	3
-1	2	Walmart	36,220	34,436	5	2
1	3	Home Depot	18,488	12,968	43	2
1	4	eBay	17,749	12,662	40	2
-2	5	Tesco	16,303	18,007	-9	4
2	6	Ikea	12,040	9,206	31	3
-1	7	Target	11,879	10,506	13	3
New	8	Woolworths	11,039	N/A	N/A	3
-2	9	Aldi	8,885	9,310	-5	2
1	10	Lowe’s	7,559	6,022	26	2
-2	11	Carrefour	7,372	7,836	-6	2
1	12	Costco	6,789	5,092	33	2
New	13	Whole Foods	6,728	N/A	N/A	4
New	14	Walgreens	5,925	N/A	N/A	2
New	15	CVS	5,620	N/A	N/A	3
-4	16	Falabella	5,611	5,263	7	5
-2	17	M&S	4,649	4,327	7	3
-2	18	Asda	4,617	3,881	19	3
-5	19	Lidl	4,524	4,605	-2	2
New	20	Coles	4,416	N/A	N/A	3
Source: Millward Brown Optimor (including data from BrandZ, Kantar Retail and Bloomberg)