BMKT525 Marketing Management- Spring 2020

Graded Case study

When Amazon and Walmart Go to War

In 2018, its the year of the clash of U.S giant retailers: Walmart, the worlds largest retailer, versus Amazon, the online giant that aspires to be the everything store. The world's biggest brick-and-mortar retailer just escalated its price war with the world's biggest e-commerce retailer. Walmart deserves credit for penetrating an e-commerce market that's was controlled by Amazon.com. Walmart is subsidizing price cuts, it requested of some third-party sellers offering their goods at Walmart.com. The move, according to experts, appears to be a response to a similar price-lowering strategy applied by Amazon.com in August of the same year. Walmart executives have decided in early 2017 to take a chunk of the online retail business and spend billions of dollars enhancing its site and make it attractive and easy to use for consumers to shop. Both are slashing prices and increasing free, same-day and other enticing delivery-and-return services in pursuit of market domination. Amazons online patience of profit-taking is well known. Both companies are fighting to capture the e-consumer. Amazon CEO Jeff Bezos has disclosed that its Prime membership program that has been introduced in 2018 has more than 50 million members in the USA and more people are signing to get this loyalty card, while Walmart doesnt have a loyalty rewards program in the traditional sense, it does offer free shipping without incurring additional cost. Walmart is finally getting serious about e-commerce. Walmart is now bulking up it's own online ads business whereby the retailer previously used space on its site mostly for its promotions; it's now increasingly selling it to other brands and suppliers simply because of the high traffic of customers that currently visiting its site. On the other hand, Amazon has built its advertising operations into a billion-dollar business, and it's expected to grow to more than twice that by 2019. Advertisers are interested in what Amazon has to offer because consumers are increasingly starting their search for products online rather than being inside the stores. Mobile marketing is being used by both retailers because almost every consumer possesses a mobile and advertisers can communicate their latest offers. Moreover, both retailers agree that the internet helps to extend the product life cycle curve, simply because every product is still available online. Both retailers are now cutting into their profit margins in a race for market share; the trend of the retail future is going into the online business. Amazon with its amazing knowledge of the online business is expanding into new categories. According to experts, Amazon and Walmart are going to take over the market for people who want stuff cheap and fast. And what Walmart and Amazon do has a way of trickling down: There is pressure on all retailers to increase speed and lower the cost. The Walmart-Amazon clash, many observers say, is part of a much larger battle compelling retailers to spend billions of dollars in new warehouses to facilitate quick delivery as the shift toward online shopping accelerates. Meanwhile, Walmart has been charging deeper into online retail. Since 2017, Walmarts online sales are up 78% and are now growing twice as fast as Amazons, according to Forbes the most reputable Business magazine. Walmart plans to deliver online orders from 1,600 stores by years end, while Amazon operates over 175 fulfillment centers around the world. Rather than luring the customer to the merchandise, the merchandise is going to the customer, and the industry is transforming itself. Still, Walmarts online shopping sales are growing fast, and Walmart executives believe with more communications in mobile marketing they should be able to win the retail battle and force Amazon to second place.

Amazon versus Walmart, the battle of the giants, may often leave smaller retailers feeling like they're scrambling for crumbs from this two powerful retail. Who will win is up for grabs.

Questions:

1. As a marketing consultant to Walmart, discuss and explain how you can apply the four classic hierarchy models (micromodel) for the company to gain an edge over Amazon.
2. A product consists of various product lines. Conduct analysis and search for one kind of product offered by Procter & Gamble and sold at Walmart and apply the four product mix. Use google search to come up with an example to support your answer.
3. How can you apply product mix pricing to Walmart when it comes to online shopping. List and explain all the pricing strategies and support your answer with an example.
4. In your opinion, which communication budget method Walmart should use in their promotional campaign in comparison to Amazon? Explain all methods and justify your response.