In Going to War, Jeff Bezos, You Might Want to Pick on Someone With Less Cash Flow Than Wal-Mart
Wal-Mart (WMT) and Amazon (AMZN) started and have lived as very different companies. Wal-Mart’s the low-cost superstore attracting legions of value seekers. Amazon appealed from the start to the wired crowd.
But as time goes on, these two retail giants are looking more alike and fighting for the same customers. Back in 2000, 43% of Americans used the internet, according to the United Nation’s International Telecommunications Union. Last year that number was 78%. People shopping on the internet can compare prices in a way they can’t standing in the aisles of a Wal-Mart. Meanwhile, Amazon is setting up new distribution centers in a bid to lower delivery time and make online shopping more of an immediate-gratification experience.
Amazon is crushing a lot of retailers, chief among them is Best Buy (BBY), as shoppers browse at brick-and-mortar stores but buy online.
But it will be harder to crush Wal-Mart, the world’s biggest retailer. Last week, in a shot across the bow, Wal-Mart said it wouldn’t sell Amazon’s Kindle tablets – even though it will carry tablets made by Apple (AAPL), Google (GOOG), Barnes & Noble (BKS) and Samsung. Consumers can use the Kindle Fire to read, play games, watch movies and – crucially -- shop on Amazon. It’s easy to see why Wal-Mart wouldn’t be eager to promote that or give it shelf space.
As this war seems likely to develop further, who’s in the best position? Amazon has far higher revenue growth.
But Amazon needs to be able to sustain its business long enough to make it through a fight.
Wal-Mart is bigger.
It has a better return on invested capital
And look who's got cash.