Using the analogy of the fabulous Game of Thrones, it is no longer a War of the Channel of Bricks n Mortar V the Channel of the Internet. Both Kings have used their “Little Birds” of omnipresent analytical data mining and customer focus groups to see the future of retail and it is Omni-Channel. In the past both Kings have been happy to be masters of their own realms and tolerated small incursions for the better good. But now King Doug of Walmart has seen the naked ambition of King Jeff of Amazon to seize the overall Iron Chair of Omni-Channel for himself and threaten the very survival of all other Channels. War has been declared!!! Read my full article on the state of play in what will be remembered as the greatest Epic Battle for the minds, hearts and more importantly the pockets of consumers.

THE BATTLE IS ON !!!!! Who will take the Iron Throne of Omni-Channel !!!

Omni Channel is the new battleground and the prize is Global Retail Dominance. The physical earthbound channels of “Bricks & Mortar (B&M)” have been too long transfixed by the ascendency of the ethereal in the Cloud “ Internet Channels”. They have seen their realms devastated by the marauding intrusions from above, led by King Jeff of Amazon. No longer. Led by King Doug of Walmart they have decided to fight back and put the new upstarts in their place.

Lets look at the 2 main combatants and what strategies they are following.

Amazon continued its phenomenal growth in 2015 with year on growth of 20% to sales of $107bn and 304m worldwide accounts. No letup in 2016 as Amazon blew past first quarterly earnings estimates boosted by a 28% sales increase.

From his “Little Birds” King Jeff would clearly identified that their cost differential gap will narrow significantly in the future due to “Price Blood Letting in the Channel of B&M “and that key customer needs, which are the key enabling factors in the B&M channel, are lacking or limited in the current Amazon model. These “unsatisfied consumer needs” will severely limit its growth in the near future namely: (i) Same Day experience (ii) The Touch & Feel experience (iii) Knowledge Access (iv) Hassle free shopping—(type in hairdryer and you will get 16k results ). Aligned to these is the increasing problem for Amazon with returns, both in costs and markdowns.

King Jeff advised the Great Council that these deficiencies are due to the sociable insecure nature of consumers and they cannot be resolved from their kingdoms in the Cloud. He warned that this puts a finite limitation on their future potential income and could even threaten their long term survival. They all have noticed the Channel of Bricks n Mortar preparing for all-out war by putting their houses in order and empting their Treasuries to train / master the Ways of the Internet so morphing into the more formidable and sustainable “Bricks n Clicks” model. There is no doubt that when they are ready B&M, led by King Doug of Walmart, will launch a full onslaught on the realms of the Internet, seize their war chests and take the Iron Throne of Omni-Channel for himself. There was also the threat of the fearsome Dragon Alibaba raiding their realms by breathing fire from the faraway Clouds of China. He told them he was going to take the battle to all them first !!

What strategies has King Jeff taken ?

• A key strategy for Amazon is to leverage its expertise of the Cloud by growing the high margin AWS Cloud services which will shore up the declining margins elsewhere.
• Amazon realise that they must appear to the consumer in a physical form. They have opened Amazonbooks –firstly in Seattle’s University Village and then University of California, San Diego. Are they trying to find the secret of serendipity which the internet is struggling with? Or, as the nucleus of the store is the new technology devices Echo, Fire TV & Tablets, Kindle e-readers and extensive range of Amazon Basics ( accessories), is it to offer the consumer hands-on confidence building experience in its tech products? Both these and more importantly I believe a physical location is to provide a more personal shopping experience, reduce shipping costs from click n collect and increase brand awareness. The physical locations targeting Universities might be a tell-tale strategy for future growth.

Alibaba is following foot with opening its first physical store in China start of this year.

• Offering Amazon Prime –54m in U.S. have this –which guarantees fee 2 day delivery and access to music, streaming videos and books with early access to special offers for $99 fee per year. 51% increase in subscriptions last year.
• Heavy investment in International expansion which may add pressure on profitability in the short term but reap rewards in the long term. There is a danger that Governments abroad will react to the increasing impact that internet sales is having on their tax returns / employment the same way that the US government is about to do — implementing Online sales tax reform via the Market Place Fairness Bill.
• Opening Distribution centres to achieve a higher rate of daily delivery –fulfilling a key want of consumers.

Walmart total revenue for 2015 was $482bn up 2.8%. Strong start to trading at start of 2016 showing +0.38% when take account of so many store closures.

Last year, Walmart’s “Little Birds” must have informed King Doug that in addition to the current serious unrest / disruption in the Channel of Bricks n Mortar caused by other ambitious pretenders ( led by his twin brother King Target of the Realm of Upscale Discounters) they have identified potentially more serious foreign adversaries assembling their forces to join the affray. Unlike many upstart foreign invaders in the past, who were easily punished and repulsed, Low Priced competitors such as Primark in clothing and the German discounters Aldi & Lidl in fresh food / general merchandise have decimated their way across Europe and now landing their forces in his realm.

King Doug saw the light. A now evangelic Greenseer, he shared his profound vision that “ The winners in this time of change will be those who put the customer first” ( surely always the raison d’etre of retail) . He instigated a comprehensive Operational Overhaul to  “Deliver on a seamless experience for its customers 260m times a week.” The breath of changes and investment amounts are impressively substantial at $12.4bn in capital investments alone last year but also highlight clearly the complacency & under investment in recent years. The result has been:

• Closing 269 unprofitable stores across the globe including its entire fleet of 102 smaller “Express stores” but will open 405 new ones this year, as it shifts its focus to Supercentres and Neighbourhood Markets in profitable locations. Abroad has been plagued with currency fluctuations and seen major re-adjustment with closure of 115 stores– priority is to lower costs in UK and Canada to fuel growth.
• Investing in his people by spending $2.7bn over 2 years in higher hourly wage rates, education and training. Will result in raising staff morale, increasing productivity and producing higher basket spends.
• Investing over $1bn in improving technology and inventory processes. This will allow replication of Amazon’s advanced forecasting capability and higher margins / cash flow with more efficient stock management processes.
• Attracting customer by leading in price –improving the customer’s in house experience by ensuring the stores are clean & easy to navigate –speeding up checkout times by improving setup, productivity and introduction of Walmart Pay—ensuring relevant brands are always in stock.
• Expanding its fresh and organic produce range and adding food to its website offering.
• Leveraging their huge network of stores as click n collect centres for their Ecommerce offerings as well as allowing customers to phone in their orders and then picking them up at the store at a convenient time. Alternatively they are experimenting with Uber & Lyft to deliver direct to the customer.
• Setting huge goals to be more sustainable which will sit well with many people (i) creating zero waste (ii) Running on 100% renewable energy (iii) selling products that sustain people & the environment (iv) supporting American manufacturing.

Summary: Who will sit on the Iron Throne.

The Coming of Age King Jeff of Amazon seems to be unstoppable. However Scott Galloway, Clinical Professor, NYN Stern voiced last year that Amazon had two major flaws –“ One is that Amazon is single channel retail and the only future will be multi-channel and Two that Amazon’s shipping costs which are unsustainable now will worsen as he predicts that firms like Uber will be the most disruptive force for Amazon in the future “. King Doug has certainly taken these comments on board as he rolls out Uber & Lyft at very competitive rates.

King Doug of Walmart, master of his craft for 54 years, seems on the surface to be the most strategically challenged as margins / market share will be eroded by the intense competition/ new entrants in the marketplace. However the pain of this “ Aggressive Price War” in the B&M Channel will conversely allow those B&M’s with growing Omni- Channel capability like Walmart to erode the competitive advantage of the current lower cost Amazon who will be forced to compete on price further eroding their thin margins. I believe Walmart’s huge recent investments in their people & technology aligned with changes to processes are the correct strategies which will reap rewards in the medium term. When the Iron Bank of Bravoos (the Financial Markets) voiced their displeasure at the low earning growth projections up to 2018, King Doug seems to have assuaged their concerns by arguing this short term pain is necessary to “support the long term health of the company.” The question for me is whether King Doug can leverage the clear strategic advantage afforded by his huge network of 11,500 physical stores which are embedded in the heart of the local communities—the jewels in his crown which King Jeff sorely covets.

Time will tell.