Last week, we took note of a CNBC interview with former Walmart CEO Bill Simon, who the story said “slammed Amazon for using cloud and ad revenues to support what he called meager retail profits.” He said that Amazon has been “gaining traction and profitability by other business activities that have nothing to do with retail," including Amazon Web Services and advertising. Walmart, on the other hand, “went out head to head, knuckle to knuckle and won market share in retail by executing a business model that customers wanted.”
I argued that Simon should stop whining about Amazon figuring out a formula that helps to support its retailing business, which continues to evolve as the company looks for new competitive advantages. They figured out a better way, or at least a more effective way, which was something that other retailers were not able to do. Simon would be better off wondering why he didn’t figure out a way to better compete with Amazon, and peer around the corner into the future, when he was in Walmart’s c-suite between 2010 and 2014, a time when Amazon was achieving considerable competitive traction. It is time for him to show a little style, concede that Amazon has been smart enough to reinvent the game and create a new economic model, and talk about what its competitors must do to differentiate themselves and succeed.
MNB reader Michael W. Bruce responded:
I’m not going to knock Mr. Simon; we all whine, he just gets to do his to a much wider audience. But I’d like to offer for thought, “What if?”. What if Walmart had succeeded in the 90s and early 2000s with their own ambitions to start a retail bank for the unbanked? While Mr. Bezos built his “cash cow” in an unregulated area of commerce, computer outsourcing, Walmart chased the dream of building a banking behemoth to cater to their clientele, most of which didn’t have much use for today’s banks with high interest rates and account charges. Walmart ran headlong into one of the strongest political lobbies out there and had their dreams blocked by the banking regulators, something that Amazon did not face. What if Walmart had succeeded, which by now could have been one of the largest banks in the nation based on deposits? They would surely have created a second cash cow (to their retail operations) which could have been used to help subsidize their technology and commerce investments, and maybe been on par with the kind of investments that Amazon has made.
Just something to ponder. Being an old traditionalist, I wasn’t “for” their being a bank, but would have enjoyed watching how it impacted the retail banking horizon.
And MNB reader John Rand chimed in:
Like you, I find that Mr. Simon’s comments on Amazon are slightly odd, even though I have heard similar opinions all across the industry from retailers and even suppliers.
What amuses me about all this is the echo I hear – since these are almost exactly the same comments that were being made about Walmart in the 1980’s and early 90’s as everyone began to feel the pressure of Walmart’s growth and expansion.
I vividly remember being present at what can only be called a diatribe launched by a very senior leader at a moderate sized local grocery chain in New England, about how Walmart wasn’t really a terribly good retailer but how their logistics provided a tremendous advantage in overhead and their ability to blend high-margin products such as clothing and sporting goods to support less margin-friendly categories such as traditional center store grocery was inherently unfair and made competition difficult.
And, of course, he was right about the advantages Walmart had, and this was before the Supercenter concept had even fully taken hold. I will note that the chain is still in business and has thrived, but it certainly was no cakewalk.
I suspect the same comments were made by greengrocers and general stores in the 1920s when the self-service supermarket was first developed (and no, I don’t quite go back that far…)
The wheel turns. Disruption leads to innovation which leads to more change and more disruption. There is no place where it stops and stabilizes for very long, and it probably wouldn’t be healthy if it did.
I argued that Simon should stop whining about Amazon figuring out a formula that helps to support its retailing business, which continues to evolve as the company looks for new competitive advantages. They figured out a better way, or at least a more effective way, which was something that other retailers were not able to do. Simon would be better off wondering why he didn’t figure out a way to better compete with Amazon, and peer around the corner into the future, when he was in Walmart’s c-suite between 2010 and 2014, a time when Amazon was achieving considerable competitive traction. It is time for him to show a little style, concede that Amazon has been smart enough to reinvent the game and create a new economic model, and talk about what its competitors must do to differentiate themselves and succeed.
MNB reader Michael W. Bruce responded:
I’m not going to knock Mr. Simon; we all whine, he just gets to do his to a much wider audience. But I’d like to offer for thought, “What if?”. What if Walmart had succeeded in the 90s and early 2000s with their own ambitions to start a retail bank for the unbanked? While Mr. Bezos built his “cash cow” in an unregulated area of commerce, computer outsourcing, Walmart chased the dream of building a banking behemoth to cater to their clientele, most of which didn’t have much use for today’s banks with high interest rates and account charges. Walmart ran headlong into one of the strongest political lobbies out there and had their dreams blocked by the banking regulators, something that Amazon did not face. What if Walmart had succeeded, which by now could have been one of the largest banks in the nation based on deposits? They would surely have created a second cash cow (to their retail operations) which could have been used to help subsidize their technology and commerce investments, and maybe been on par with the kind of investments that Amazon has made.
Just something to ponder. Being an old traditionalist, I wasn’t “for” their being a bank, but would have enjoyed watching how it impacted the retail banking horizon.
And MNB reader John Rand chimed in:
Like you, I find that Mr. Simon’s comments on Amazon are slightly odd, even though I have heard similar opinions all across the industry from retailers and even suppliers.
What amuses me about all this is the echo I hear – since these are almost exactly the same comments that were being made about Walmart in the 1980’s and early 90’s as everyone began to feel the pressure of Walmart’s growth and expansion.
I vividly remember being present at what can only be called a diatribe launched by a very senior leader at a moderate sized local grocery chain in New England, about how Walmart wasn’t really a terribly good retailer but how their logistics provided a tremendous advantage in overhead and their ability to blend high-margin products such as clothing and sporting goods to support less margin-friendly categories such as traditional center store grocery was inherently unfair and made competition difficult.
And, of course, he was right about the advantages Walmart had, and this was before the Supercenter concept had even fully taken hold. I will note that the chain is still in business and has thrived, but it certainly was no cakewalk.
I suspect the same comments were made by greengrocers and general stores in the 1920s when the self-service supermarket was first developed (and no, I don’t quite go back that far…)
The wheel turns. Disruption leads to innovation which leads to more change and more disruption. There is no place where it stops and stabilizes for very long, and it probably wouldn’t be healthy if it did.
- KC's View:
