Would a radical partnership help Walmart thwart Amazon?
Amazon.com, especially after the Whole Foods acquisition, is viewed by pundits and analysts of every stripe, as unstoppable and unconquerable. The premise is not new, yet many behemoth companies have been in a similar position only to be unseated from their dominance. Two examples are General Motors and Sears. So why would Amazon be the exception that can never be toppled from on high?
Amazon subsidizes the cost of its e-commerce business with its commercial cloud computing platform Amazon Web Services (AWS) and revenues from its Amazon Media Group (AMG) advertising division. Without the $12 billion+ AWS cash cow, the company might not be able to carry out commerce operations in the manner that it does — essentially unprofitably.
AWS is so crucial that, like Achilles’ heel, if its revenue stream was wounded significantly, Amazon would likely have to adjust merchandising to a more conventional profit and loss model, damaging sales considerably.
Walmart has an increasingly gladiatorial relationship with Amazon, even though each largely serves different consumers. The retail giant could decide to take on AWS by undercutting it, especially now that Amazon has announced a new AWS pricing structure that might soften the service’s profitability. Walmart wouldn’t build its own cloud service, rather it would back an existing competitive offering, lowering the cost to a threshold that users find far too reasonable to resist. Maybe half the cost? Walmart’s recent demand that its vendors give up AWS signals that management recognizes the importance of the service and that attacking it (symbolically, so far) is fair game.
It begs the question, “Who would be partner to such an idea?”
Fifty-five percent of product searches start on Amazon. That’s a significant hit to Google’s core business: ad supported search. On its own, the tech giant has reason to counter its revenue depletion by slashing Google Cloud Platform fees to impact AWS. If Walmart backed Google’s cloud, it would force Amazon to raise prices or reduce services to run its e-tail business more profitably.
While this “partnership” seems far-fetched, each company has a stake in turning back Amazon. The two are already working together to enable customers to place orders from Walmart via Google Home. If they could form a federation of sorts, it just might open an opportunity to impede adoption of Amazon’s Alexa tech.
Untold billions of dollars in physical and digital commerce are at stake. Radical partnership? Not at all.
- What if Walmart Leveraged a Radical Partnership Tactic to Thwart Amazon? – Ken Lonyai
- General Motors Rise and Fall – YouTube
- Who Killed Sears? 50 Years on the Road to Ruin – Investopedia
- Amazon Profits Could Take A Further Hit – Amigobulls
- Will the Walmart/Google voice deal give Amazon’s Alexa a run for its money? – RetailWire
- Google and Walmart’s Big Bet Against Amazon Might Just Pay Off – Wired
- Should Walmart restrict carriers from working with Amazon? – RetailWire
DISCUSSION QUESTIONS: Would a Google/Walmart alliance as described in the article help the two companies compete more effectively with Amazon? Are there other corporate alliances or mergers that you think would accomplish a similar result?