How can anybody compete with Amazon?

Walmart extended its free two-day shipping, a clear bid to counter the growing popularity of Amazon Prime. Walmart’s decision to price its offer at $49 compared to Amazon’s $99 reflects the company’s failure to understand that the popularity of Amazon Prime is not so much about price as it is about creating an integrated strategy in which the easy access to content plays a significant role.

Households that have signed up to Amazon Prime also get free music, movies, television series and books (from a catalogue of more than one million titles), as well as a range of other offers that a part of a clear strategy of improved service. Same-day delivery is available in a growing number of cities, while in others it is possible to get delivery within an hour of confirming an order. Any parent considering saving themselves $50 by signing up with Walmart risks sparking their kids’ revolt, while losing out on all that free extra stuff that Amazon offers.

Amazon Prime has been particularly successful in high-income households: more than 70% of those with income of $112,000 or above opt to pay the $99 per year. Once they have stumped up the cash, they then tend to buy more things from Amazon, almost twice as much as before, which means that those households are doing less and less of their shopping in their traditional supermarkets.

The question this raises is can the competition challenge a company that isn’t worried about its annual profit and loss. Amazon’s results may not be impressing the analysts, but its share price continues to rise: some 40,000% since it went public, and that is innovating at such as speed that it is now talking about one-hour delivery, who knows, perhaps through drones?

The obstacles being set up by Paris City Hall in response to Amazon’s roll out of one-hour delivery in the French capital have nothing to do with environmental concerns and much more to do with protecting the interest of French companies, large and small. As for Walmart, a vastly larger and more powerful competitor, the problems it is about to encounter will be shared by growing numbers of retail outlets in Europe and the Americas…

(En español, aquí)