A Brief History of Shopping: From Sears to Amazon in four uneasy upheavals
city-journal.org
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The breakthrough was the "schedule system". Orders came in and were recopied onto pick slips for different departments. Each order was given a temporary bin and a 45 minute pick window. Only orders for a given time window were picked in that window, and picking was by people close to that area of merchandise. Picked items were sent to the bin for that order, and at the end of each window, the bins went off to the checking and shipping station. If something was missing from the order, a second try was made in a day or two, and shipped separately. This is O(N * log(M)). Huge win.
This was all done with carbon paper, pneumatic tubes, and other advanced 19th century technology. They had the key idea - move data, not merchandise.
WalMart had a similar edge. They were one of the first retailers to bar-code everything. All the scanners were networked. HQ in Bentonville, Arkansas knew within hours what was selling and what needed to be restocked. They were able to keep unsold inventory down without being sold out. Unsold inventory is the curse of retail. Over half of apparel is eventually discounted or dumped. Sam Walton once commented that their edge wasn't size, but data.
Amazon everyone here knows about, so there's no need to explain them.
Absolutely. I run a small retail pet-farm store location. This is such a curse, that I often wonder why it isn't talked more about among small retailers. Certainly the salespeople from the different suppliers never ever talk about about it for obvious reasons. The problems with not talking about it to me is that I may go out of business if I don't understand this principle/curse.
It never ceases to amaze me that for all of the money brick and mortar retailers spend on marketing, etc. they cheap out on the most fundamental part of retail - taking the customers money.
In retail sales, I would guess Amazon could catch up to Walmart in 10 to 12 years if everything goes well for Amazon, assuming Walmart holds steady (which impressively they have so far). Walmart did finally grow for the first time in years in 2017, jumping from $485b in sales to $500b (they were stuck in the $482b-$485b range for three fiscal years).
Walmart has perhaps ~$450b in strictly retail sales globally. Amazon should be at something like $160b to $180b this year (in retail, including Whole Foods). Walmart's US retail sales were 270% larger than Amazon US for 2017. One of the not often discussed data points, is that Amazon's traditional online retail sales are no longer growing very quickly. That big retail growth slowdown has been hidden by the success of AWS and more recently advertising. I'd bet on their online sales growth being a slugfest going forward, with their online growth rate dropping to near single digits within a few years.
There's actually a very plausible scenario where Amazon never passes Walmart in retail. That premise is that it's between very difficult and impossible for Amazon's online sales to match what Walmart's epic physical store position makes possible in terms of retail sales volume. It's not a popular media premise though, the Amazon-crushes-all story is what sells. Perhaps Amazon will divert a lot more resources toward expanding physically going forward to counter that (at least they seem bent on that, maybe they've figured out that online retail sales will never match offline sales in the US).
Amazon so far has been mostly eating other retailers, and perhaps robbing Walmart of some growth it would otherwise have picked up. As Amazon pursues its next $100b in retail sales growth, is it possible for that to not detract from Walmart's $500b in sales? It's difficult to picture Amazon getting as big as Walmart in retail, without killing Walmart. If that does happen - they both survive intact - the rest of retail will be a complete wasteland of destruction (there's not enough growth in the US economy to accomodate two mainstream retailers the size of Walmart anytime soon, without a lot of other retail getting killed in the process).
I have so many questions for you. Have you been studying Walmart long or is it just a passing fancy? How does a company just squeeze out ~$15 billion dollars from a revenue machine in motion (was there some long term plan that came to fruition? Did the pull some Office Space kind of caper and "find" it in their books?)? I have had this picture in my head of Walmart being very similar to fungi (mushrooms specifically): all people see is the storefront, the spiteful and mean-spirited "people of Walmart" caricatures, and the evil business destroying monster (these would be the toadstools); hidden beneath the surface is a massive network of nodes, pathways, connections, and raw infrastructure constantly shifting mass and energy at every moment in every type of climate and condition. I read somewhere that they lose ~$4 million a month in theft and damage. I thought that was a lot... $500 billion... that was one of the stimulus packages that saved the banks...
Fascinating. Your comment was a delight and I am off to dig up more on the company that will hopefully carry humanity to the asteroid belt.
The $15b gain in sales was in part due to ecommerce gains, while physical retail remained steady with modest same store sales gains. Thanks in part to the Jet.com acquisition, they grew by 44% online in 2017 (fourth quarter online growth dropped to 23%, with the Jet.com boost rolling past). They've been going around buying up independent retail brands, like ModCloth, Bare Necessities, Bonobos. They view that brand accumulation as building up a moat vs Amazon, I'd expect them to continue with that.
The most interesting thing about Amazon today, is that at least 3/4 of the value in their business is outside of traditional retail. Their relatively young ad business will be worth more than their retail business within a year or two (if it's not already). Sometimes I think Alibaba was their primary inspiration for going aggressively that direction, more so than Google or Facebook. With enough of a thriving ad business on top of retail, they can do things no other normal retailer can ever do when it comes to margins, they can safely take their margin in retail to zero (ie intentionally yield zero profit in retail, and build an ad business as big and profitable as Facebook's). Walmart can't compete with that tactic, it'll draw intense anti-trust scrutiny over time if they do it.
Competing with Amazon has helped push Walmart's annual profit down considerably over time, despite sales doing well: $15.9b (fiscal 2014 profit), $16.3b, $14.7b, $13.6b, $9.8b (fiscal 2018). If Amazon uses the nuclear option on margins with a thriving ad business (not to mention AWS) as a profit buffer, they might be able to push Walmart into losing money in retail in a price fight. I'll be curious to see if that's the direction Amazon goes competitively.
I spend four to five hours per day reading and have a very strong memory, so I hoover up a lot and remember most of the things I read. No particular focus on Walmart.