To Stay Competitive, Amazon Is Building Out Its Physical Presence, While Walmart Focuses on Digital

The companies are flexing their weaker muscles

Ecommerce turns to retail as retail focuses on digital.
Sources: Getty Images, Walmart

Amazon is not known for its physical presence in retail, and Walmart did not make a name for itself in ecommerce. Yet, recent moves by both indicate they’re eager to become more competitive by focusing where, historically, they have been weaker as they vie to ultimately become the most convenient shopping option.

For Amazon, that’s with checkout-free shopping experience Amazon Go, and for Walmart, it’s with acquisitions, including ecommerce company Jet.com and, most recently, VR shop Spatialand.

A 2016 study from Pew Research Center found eight in 10 U.S. consumers shop online—although 64 percent prefer buying from physical retail locations with all other factors being equal.

Indeed, even though Amazon offers fulfillment of some orders in a matter of hours, it’s still not as convenient as popping in to a store to resolve a need immediately, said Dave Mayer, president of shopper-focused design firm Chase Design. In addition, returns are a hassle and deliveries left at a customer’s front door can get stolen or spoil, Mayer said.

Building out a physical presence also allows Amazon to demonstrate new or complex products, such as the Amazon Smart Home Experience at Kohl’s. And physical stores provide a permanent marketing opportunity to create awareness and familiarity, Mayer added.

For its part, Walmart has 5,412 total retail units in the U.S. alone, including Supercenter, Discount Store, Neighborhood Market and Sam’s Club locations. And Walmart said it bought Jet.com specifically to reach new customers online, build out its ecommerce foundation and win the future of retail. Now, with a VR shop in the fold, Walmart is better positioned to make good on that claim—and to perhaps eventually make a move to beat the Amazon experience in digital and create a more immersive environment for browsing and replenishment, Mayer said.

“If you think about Amazon being the king of digital and Walmart being the king of physical, both are building capabilities in each other’s spaces,” he added. “Both firms recognize that they need to be wherever people shop and that this is channel independent.”

In addition, Mayer said VR in particular may help Walmart appeal to consumers shopping at retailers like Target and Whole Foods who do not necessarily see themselves as Walmart customers, if the retailer can use immersive VR as a marketing tool to tout new experiences in stores.

Meanwhile, Amazon is focused on eliminating the pain point of waiting in line to enhance its in-person experience. It can also harvest data from Amazon Go, such as where consumers stop and what they pick up, as well as what facial expressions and hand gestures they make, said Wilson Standish, director of innovation at data-driven marketing agency Hearts & Science.

That being said, VR will give Walmart access to similar data points about how consumers navigate a 360-degree shopping experience—including what direction consumers look, as well as how they navigate virtual stores.

Standish likened this to video game developers using heat maps to look for rage quitting, or the point at which a player becomes so frustrated he or she quits.

“A similar thing can be said of a retail experience, especially one like Walmart,” he added. “At what point do all the options become overwhelming and the person leaves? [Following] navigation in VR [can] help [Walmart] understand the most beneficial flow for a shopping experience.”

The question now is whether Amazon will think about physical stores in different ways than a physical retailer and if that fundamentally improves the customer experience—but also how Walmart will use its knowledge of physical retail to further inform its digital approach.

“I’ve felt that online shopping is still in web 1.0,” Standish said. “While we’ve seen innovation in the purchasing part of the consumer journey, discoverability is ripe for disruption. And a player like Walmart with such a large inventory will need to figure out how to make finding the right product or a new product online easy and fun.”


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