Amazon.com Inc. (NASDAQ: AMZN) demonstrated again why it dominates the online retail field. In May, it posted 182 million unique visitors, fourth among all sites in the United States. Wal-Mart Stores Inc. (NYSE: WMT), the world’s largest retailer, had an online unique audience of 86 million.
In the comScore measurement of the top 50 U.S. media properties in May, there are only two retailers, which shows how far behind Amazon and Wal-Mart the balance of the industry is. But the figures also show the relative failure Wal-Mart has had as it tries to leverage its $485 billion in global annual revenue and 11,000 stores into an Internet presence that comes close to Amazon’s. Wal-Mart management knows as well as anyone that brick-and-mortar retail has passed its best years and cannot carry the price of employees and the costs of physical stores indefinitely. It is part of a world in which cars will not need drivers and groceries will be delivered by drones. Unfortunately, Wal-Mart’s current online revenue is barely $20 billion, or about 5% of the retailer’s total sales.
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Amazon has what business school professors like to call a “first mover advantage.” It began selling books online in 1994. It has been clever to keep its lead. First, it diversified well into other products, which now include everything from pet coffins to surf boards. Next, it diversified into online books, smartphones and tablet PCs. Amazon will not disclose whether it makes money on any of these. Its management reasons that popular products lure people to Amazon.com, where they may buy more than they were looking for.
Amazon’s latest major offering is its Prime service, which includes free shipping and video on demand. Again, Amazon will not say whether Prime makes it a dime at its annual fee of $99.
Wal-Mart has been unable to keep up with Amazon at all. Much of the purpose of Walmart.com is to get consumers into its stores. The balance is a partial copy of Amazon.com and its categories of inventory. It does not have its own branded TV hardware or tablets, though. Its video on demand service, powered by VUDU, is buried among the tens of thousands of other products and services at Walmart.com.
The most damning criticism of Amazon is that it does not make money. It has, however, maintained a huge lead over its online competition. That is better than being in an industry where stores have to be on street corners or in malls, and in which employees strike for higher wages.
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