Sunday, January 26, 2020

Walmart: 1 Amazon: 0

Two-day shipping for free is no big deal - and you don't have to "join prime" to get it.

Mark needed a new pair of jeans.  The last pair he bought a few years ago from Boot Barn- they were "cowboy cut" Wanglers - model 13MWZPW which makes it easy to search online.  I went online and searched - Boot Barn, Amazon, Walmart, eBay, Target, etc.  Target doesn't carry them, only "pre-distressed" ghetto jeans.   It quickly settled down to Amazon versus Walmart - each offering $19.95 prices, and "free shipping" if I bought two pairs.

The catch was, Amazon offers free regular shipping, and two-day shipping only if I "join prime" which I don't want to do, as I explained before.   Walmart offers two-day shipping for free, period.

I clicked on "buy" on the Walmart site. In the battle for online hearts and minds (and wallets) Walmart won this round.

But it made me think - is Amazon shooting itself in the foot with this obsession with "prime"?   It is a loyalty program, and I suspect it makes a lot of money for Amazon, as not only do they collect a fee for it, but it sort of encourages, if not forces, people to narrow their online shopping experience to just Amazon.

But for more price-conscious shoppers, "prime" is not that big a deal.  We buy a few things online, but I shop on price not convenience.  And when it comes to price, Amazon doesn't often have the best prices.  When it does, I buy from them.  When it doesn't, I buy elsewhere.  I bought parts for my laptop online - from various sources.  Ditto for the scooter parts.  Amazon either didn't have these things, or wanted outrageous prices for them.   If you don't look around, you may end up overpaying for things.

Funny thing, after I started writing this blog entry a week ago, I saw an article online saying essentially the same thing - Walmart has made Amazon Prime irrelevant.   But wait, it gets better. Better?  How?  Well, in addition to free shipping, how about negative cost shipping.  Sort of like negative interest rates - it makes no sense!   The Jeans arrived in two days and the size was off.  So we returned them (painless process - print a label, put it back in the box, take to the Post Office or hand to your carrier) and ordered the next size up.  This time around, Walmart offers a "discount" on shipping, if I am willing to forgo the 2-day delivery and accept three-day delivery.   The bribe isn't much - they first offer $1.50 or so, but when I type in my zip code, they reduce this to $0.75.

What is going on here?  Well, it is a gag, of course - the shipping is not "free" at all, nor are they paying me to ship things, but rather are folding the cost of 2-day shipping into the transaction and then bribing me to accept a slower (and less expensive) shipping alternative.  Very clever - and it worked.  For seventy-five cents, I agreed to wait a day longer.  It is smart marketing and pscyhology - instead of asking me to pay a monthly fee for "free shipping" like Amazon does, they offer it for free, period, and then incentivize me to accept a slower, cheaper method.   It is like how I structured my leases as a landlord - I never charged "late fees" but instead offered an "early payment discount" of $25 (and raised the "normal rent" by $25 accordingly).  Tenants loved it - and loved me for offering a discount instead of a fine.  Walmart is on to something here.

Oh, and that return?   The very next day I get an e-mail from Walmart saying it is being processed.  Walmart is getting on their game, which shouldn't be too hard for them to do, as what Amazon has done to retailing is what Walmart did to competitors decades before: cutting prices and offering shopping convenience -  and systematically under-pricing competitors to force them out of business.

Of course, if you join "Prime" you also get "Prime TV" which turned out to be a nothing - just a pitch to buy more television, much as "Prime" is just a pitch to get you to buy more junk on Amazon - and become a serial-shopper, coming home every night to packages on the porch (the ones that are not stolen) that clutter your house with yet more junk, until you become a hoarder.

But the point is, and I did have one, that Walmart is getting its game on, and this should concern Amazon.   Sears walked away from its storied catalog and online service (Prodigy) at the dawn of the computer age.  One wonders whether Sears could have leveraged both and still be in business today (instead of plowing more and more money into Mall locations).  Walmart got a slow start in the online business, but is playing catch-up quickly.

And they have a huge advantage.  Walmart has four times as many employees as Amazon, nearly double the amount of sales and profits, a P/E ratio that is in the 20 range (rational, versus Amazon's 141) and so on and so forth.  Oh, and Walmart pays dividends on its stock, too.  But of course, the same could probably have been said back in the day when Sears dominated America's retail, and Walmart was the scrappy up-and-comer.

Walmart succeeded back then with a new mode of merchandising - eschewing carpeted malls and the "department store" model in favor of concrete floored "big-box" standalone stores that emphasized low price over selection and service.   In a recessionary economy, Walmart's model took off.  It didn't help any that Malls in general fell from favor as customers got tired of the high prices, huge parking lots, long walks, and being harassed by teenaged "Mall Rats".   What Walmart did to Sears, Amazon could do to Walmart.

Perhaps.  Prime is part of Amazon's problem.  Whenever I buy something from Amazon, I feel I am in a libertarian marketplace, with one hand on my gun, the other on my wallet, keeping an careful eye on Jeff Bezos as we haggle over prices.   Amazon has all the charm of a carnival huckster, trying to cheat me out of my last two cents.   Do you want "fast, free shipping?"   Well, of course I do, if it is really free.  But no, that is a confusing page they put up with every transaction asking me to join "Prime" and thus pay for fast free shipping.   When you pay for something, it isn't free - seems like a simple concept, but it is lost on many.  Worse yet, when you get to the checkout page, you find that the regular "free shipping" that was proffered at the purchase page has been replaced by an $8.95 extra-cost shipping and you have to uncheck this and re-check to get the really free shipping.  On the "app" this is even harder to avoid, as they keep egging you on to buy with one-click, which of course, defaults to the higher-cost shipping.

Any financial transaction entered into based upon a lie, no matter how trivial that lie, will only go downhill from there - a famous man once said that.  I trust Jeff Bezos as far as I can throw him, and quite frankly, I would prefer to launch him from a canon.   As a result, Amazon is not my "go to" place to buy things anymore - if it ever was - but my supplier of last resort.   I check ebay and Walmart as well as manufacturer's websites before buying on Amazon. As I noted in an earlier posting:
(I digress further:  I recently ordered a new chair mat on Amazon, as the old one was for carpeted floor, and we finally finished the wood flooring in the office.  I looked on Amazon and eBay and the best price I could find for the 46" x 60" mat from E.S. Robbins (a woman-owned company!) was $55 delivered.   I get a notice from UPS that I am getting a delivery from Costco tomorrow - what gives?  We don't belong to Costco.  I go to the Costco website and the same chair mat is $45, including free shipping.  With a couple of clicks of a mouse, a "seller" on Amazon made ten bucks.  Nice work if you can get it, and why Amazon doesn't always have the best prices, and in fact, rarely does. Lesson learned - need to check Costco next time around!)
But that does bring up a salient point:  Both Amazon and Walmart are online marketplaces.  Some items on both are sold by and/or fulfilled by, the host companies.  Others are more like eBay listings, and you are dealing directly with a merchant who is using Amazon, Walmart, or eBay (or all three) as a "platform" to sell product.  Thus, when you search for a product on these sites, you may see prices all over the map - for the same product - you have to be careful you don't click on one of those $100 jars of mayonnaise.

In this regard, it seems Walmart has a slim lead - their major problem isn't overpriced mayonnaise, but third-party vendors selling Hitler shirts, and then the media, in a moment of hysteria, claiming that Walmart is selling nazi merchandise, when in fact, it is not.  But those stories, like the "Walmart Slasher" e-mails and facebook posts, quickly die down.  So long as Walmart offers rebates on shipping (Gee, I feel like a Rockefeller!) in place of cheesy come-ons and deceptive shipping practices (that Amazon seems to favor) they may end up getting more and more business online.

It is just a matter of wait-and-see. Walmart is also aggressively moving into the food delivery business, as well as the "pick up at store" line (although the latter, I fail to see many people using).  They are not going down without a fight, and they have better ideas in their arsenal than Eddie Lampert's "Shop your way" - and a deeper war chest with which to fight.

Stay tuned!