When competing, focus on ways to improve your company by avoiding changes that diminish what your company has to offer.
Unlike the image at the top of this post that shows a ball preparing to race a cube and pyramid down a hill, rarely do companies ever get the opportunity to choose their competitors. A few months ago, Wal-Mart announced that it will stop selling Amazon Kindles. Some observers believe that this move is likely done as part of a campaign to counter the growth of what has become their biggest rival, but is it an effective strategy? I don’t believe it is.
Before Amazon was a major player, small businesses in towns were faced with the challenge of competing with Wal-Mart, which over 10 years ago had mastered its supply chain and was becoming the #1 store in America. Consumers compared their experience of having to drive to 10 separate stores with going to Wal-Mart and getting everything they need there at a better price. In most towns, Wal-Mart won the consumers over, but now its Amazon moving in on Wal-Mart’s turf.
When comparing Amazon with Wal-Mart it’s easy to list all the similarities and differences, but they are both essentially the same to the average consumer except in one area: When people think of Amazon they think delivery and when they think of Wal-Mart they think taking a trip to a massive store. Long-term, unless delivery costs go up and Wal-Mart is able to match Amazon’s online experience while improving its own in-store experience, Amazon will win consumer preference.
Here are a few reasons why:
- Consumers want convenience, and will always prefer the easier option. As people become more comfortable with computers, Amazon will become the easier option.
- Consumers like variety, to them bigger inventories are better (not always, but most of the time).
- Consumers notice. Wal-Mart has had its reputation harmed lately with ongoing coverage of its worker policy and how it sources its inventory, this will add to that negative sentiment.
- Loyal consumers don’t stick around forever. Getting rid of the Kindle doesn’t directly address Wal-Mart’s problem, which lies within the company and not with Amazon. Wal-Mart instead should have found additional ways to highlight its own online shopping capabilities and invested the money it would’ve received from selling Kindles to improving that experience, rather than shutting it out altogether.
- There will always be another competitor. Cutting off the Kindle for competitive purposes sets up a precedence for the company and will influence future behavior and practices.
However, not all is bleak for Wal-Mart. The answer to the online vs. in-store question is still up in the air. As Apple as shown, the in-store experience can trump the online experience and variables such as delivery costs going up can be detrimental to online-only models in the future. Also, Wal-Mart has many advantages over the small businesses they elbowed out of the way years ago, with the bank to back major fundamental changes to their business model. As with any company that hopes to deal with a competitor, Wal-Mart should focus on improving itself and not diminishing what it has to offer. In this case, Wal-Mart should look at why consumers prefer Amazon and find ways to integrate the practical traits into its business. It is never too late to reinvent in-store shopping.