Walmart’s Struggle Isn’t About eCommerce, It’s About Price
Walmart announced on Wednesday that it is revising its forecasted outlook for 2016 and 2017 downward, in part because of expected flat sales, and in part because the company plans to make additional unplanned investments in its business — primarily around wages, training, and the key here: investments in eCommerce. The market’s reaction has been to run away, first by contributing to the largest single-day decline in thirty years, and second by declaring that “e-commerce has won,” a conclusion that also happened to drag down the share price of other retailers like Best Buy BBY +2.86%.
Walmart’s challenges are large and complex, but the one thing I know for sure is that this is not about Walmart vs. e-commerce pure plays, or even as specific as Walmart vs. Amazon. This is about price.
Walmart has long positioned itself as the lowest price leader. Not just “a low price leader,” but THE low price leader. Its history is strewn with stories about squeezing suppliers, a bare-bones corporate headquarters, and a relentless focus on driving costs out of its notoriously lean supply chain.
The problem with competing only on price is that you’d better always have the lowest price. In recent years, that has not always been the case. Amazon doesn’t always beat Walmart on prices, but it has certainly garnered a reputation for being THE low price leader, even as Walmart has continued to position itself that way.
Originally published at www.forbes.com on October 15, 2015.