Last week, just a day or two before Wal-Mart’s announcement, Amazon said it had added one-hour delivery from local stores in Manhattan to its list of cities with the one-hour delivery service. Amazon Prime members get free two-hour delivery in these same cities. The one-hour delivery service from participating local stores costs $7.99 per order.
Why does Amazon keep raising the bar? Very likely for the same reason that the Saudis are pumping more oil than ever even though the oil market is stuffed to the gills: maintaining market share. Amazon does not mind losing money now to maintain an advantage it believes it has over competitors for the long haul. The company has even managed to persuade shareholders that modest to awful quarterly results do not matter. What matters is being all things to as many people as the company can.
Wal-Mart cannot compete with that. Shareholders treat the company differently. It is not a technology play but a brick-and-mortar play that is expected to post a profit, grow revenues and pay a dividend. Finding something besides low prices to differentiate the stores from competitors has been elusive. Wal-Mart needs to find the one thing that it can do better than anyone else and do it big. Efforts to compete with Amazon in offering free delivery for a price are destined to have no impact on Wal-Mart’s top or bottom line.
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Amazon, meanwhile, can and will match or beat any competing offer that the company thinks will add to its customer base. Amazon Prime is like a loyalty program: sign up and receive all these benefits now and plenty more in the future. Amazon is almost alone in putting its customers’ interests ahead of its shareholders’ wallets.
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