How Walmart (NYSE: WMT) and Uber Could Destroy Amazon (NASDAQ: AMZN)

Written By Geoffrey Pike

Posted June 10, 2016

walymarWith innovation as its inspiration, Walmart’s upping the ante.

While we don’t live in a completely free market society, it is still largely a system that depends on profits and losses. When you get outside of industries that are heavily controlled by government, there is competition, even if the playing field is not completely level.

Despite government regulations and the bureaucracies that come with big organizations, the only way for a company to survive long term is to satisfy customers. There is no monopoly on getting voluntary customers to hand over their money.

As technologies improve and lifestyles change, people’s demands change with the times. We drive cars instead of buggy whips. Home phones are dwindling down in usage as cell phones have replaced the landline.

If companies don’t innovate to keep up with the times, they risk losing customers. They risk losing their entire business.

Think about Kodak. It was the dominant player in the film industry. Remember you once had to load film in a camera in order to get pictures. And if you didn’t have a Polaroid, you actually had to take the film somewhere for someone to sit in a dark room and develop it.

Kodak did not stay up with the times. The company did not change with changing consumer demand. Technology, in the form of digital cameras, put Kodak into bankruptcy. Or you could say that Kodak put itself into bankruptcy by not foreseeing the change.

In the retail sector, Walmart is the dominant player. The Walton family is incredibly rich. It all started with one store in a small town in Arkansas.

But nothing lasts forever. Walmart’s dominance is still subject to the whims of the consumers. Walmart has to continue to offer goods that people want at prices they are willing to pay.

Walmart is now trying to avoid the Kodak syndrome. It seems that some of its executives can see the writing on the wall. Amazon is the digital retail giant. And it is no secret that more people are shifting into buying things online.

A Strategy for Walmart

Walmart will continue to maintain its presence in retail stores. That is still its main business. Its digital revenues still make up less than 5 percent of its total revenue. But that doesn’t mean the company should ignore the digital space and allow Amazon to take all of the business.

Walmart recently announced a new service that will allow customers to order groceries online and pick them up later that day at the store. This could be beneficial for people who are tight on time and like the convenience of doing their shopping at home.

But Walmart is not stopping there. It also announced a pilot program in Denver, Colorado and Phoenix, Arizona where customers can order their groceries or other goods, and they will be delivered via a driver from Uber or Lyft. The delivery fee will be a standard charge ranging from 7 to 10 dollars. It will be paid for when ordering the goods online.

In other words, Walmart is teaming up with two relatively new companies that are in existence only because of our boom in technology.

Uber and Lyft are examples of companies that have used technology to compete against the taxi industry. The taxi industry in most places really was a monopoly of sorts, as it was protected from competition through government laws.

But that protectionism still wasn’t enough to keep technology and innovation from competing. Just as phone companies were granted monopolies in local areas, which are losing to cell phones, the taxicab industry is losing to Uber and Lyft.

It seems to make sense for Walmart to try this test program of using Uber and Lyft. It may be a win-win situation. If the program doesn’t work, then we can be sure that Walmart will quickly drop it, or else try to refine it. But assuming it does work, it should help Walmart increase its online presence.

This is Walmart’s message to Amazon customers: “Forget about your Prime membership and getting your product within 2 days. We will get you what you want later today.” Now that is competition that I like to see.

You don’t even have to be a Walmart customer to benefit from this service, as it will likely compel other companies to offer similar services. You don’t have to shop at Amazon or Walmart to benefit from the lower prices offered by their competitors.

While online shopping has become very popular, there are still some things we just want to buy at a store. And there are some people who will always want to go to a store to buy their stuff. Walmart will still dominate the physical retail store industry as long as it continues to satisfy consumer demand. But we should cheer its attempts at innovation so that it doesn’t end up like Kodak.

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