Thursday, November 7, 2013

Black Holes

Clash of retail titans plays out in supply chain space.

Amazon – the river, not the company – drains a vast area of the globe, and concentrates all its (water) resources into a single channel. What could Jeff Bezos have been thinking of when he named his fledgling online bookseller?

Another name Amazon might have considered could be “Black Hole,” for the propensity of the retail giant to suck everything into its orbit, notably customer eyeballs and dollars. Even Walmart, long considered the unassailable king of low-cost merchandising and distribution, is running a little scared, and attempting to take a page from Amazon’s book. Walmart has been working hard to leverage their network of 4,100 U.S. and 6,200 overseas retail stores – the company says that two thirds of Americans are within five miles of a Walmart – into e-commerce assets.

As reported in the Wall Street Journal, Walmart is offering pickup at stores and lockers, rolling out same-day delivery in five cities, and aggressively recruiting e-tailing talent at its new Silicon Valley web operations center. Amazon, meanwhile, is moving into its suppliers’ warehouses. The company has dedicated, fenced-off areas inside the distribution centers of Proctor & Gamble, and reportedly, other manufacturers including Kimberly Clark and Georgia Pacific, packaging and shipping the suppliers’ products directly to customers from the companies’ own warehouses, as well as greatly increasing the number of their own fulfillment centers. They are expanding into grocery delivery and high-volume, low-cost products such as paper towels, and already offer same-day delivery in 10 U.S. cities.

“Amazon is the Walmart of the post-2000 period,” said analyst Matt Nemer of Wells Fargo, quoted in The New York Times. It’s a fair bet that Walmart still wants to be the Walmart of the post-2000 period, so the battle between the competing supply chains is likely to be fierce.

Kirk Shearer

800-989-0054 x103

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