Wal-Mart, Target Brace For Online Shift In The Retail Industry

May 2nd, 2012 by Trefis Team
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With the growing dominance of online retailers like Amazon (NASDAQ:AMZN) and eBay (NASDAQ:EBAY), the dynamics of the retail industry have changed. The world’s largest brick and mortar retailers including Wal-Mart (NYSE:WMT), Target (NYSE:TGT), and Best Buy (NYSE:BBY) are working hard to develop their online presence. With increasing penetration of Internet and smart phones, online retail has witnessed enormous growth rates. According to research firm Forrester, the U.S. online sales are expected to reach approximately $279 billion by 2015 from $152 billion in 2008. [1]

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The brick and mortar retailers are using different strategies to cope up with increasing competition from online retailers.

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A few of them are discussed below:

  • Wal-Mart is promoting store pickups for items bought online to save shipping fees. According to Bloomberg, in the last one year, Walmart has spent in excess of $300 million in buying up web-related companies in order to catch up with Amazon and eBay. [2]
  • Target has increased its online inventory by 400% to have a wider assortment of products online.
  • Best Buy is matching online prices and offering free shipping to win customer loyalty.

However, according to a William Blair & Co. study, Amazon is the undisputed leader in terms of pricing as its prices are on average 14% lower than Target’s and 9% lower than Wal-Mart’s. [3] It is still early to comment on the likely shape and structure that the online retail industry will take in the coming years, especially with the expected advancement in digital and mobile technology.

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Notes:
  1. See: Online Retailing: Britain and Europe 2012, Centre for Retail Research [↩]
  2. See: Walmart scrambling to catch Amazon in online retail, The Vancouver Sun [↩]
  3. See: Wal-Mart, Target fight back against Amazon.com, TechFlash [↩]