Customers who pay the $99 annual subscription for the Prime delivery service get free two-hour delivery service in Prime Now areas and may pay $7.99 for one-hour delivery. Not every item in Amazon’s vast online store is available, but the company says that “tens of thousands of daily essentials” may be ordered through a mobile app.
Leaving aside a discussion of whether there really are tens of thousands of daily essentials, let’s think for a moment about how the world’s largest retailer, Wal-Mart Stores Inc. (NYSE: WMT), may have to respond to Amazon’s Prime Now delivery service and, potentially, a Prime Air delivery service using drones.
Many Wal-Mart customers will not pay $99 a year for Amazon Prime, so two-hour delivery will not be available either from Wal-Mart or Amazon. Wal-Mart has no supercenters or Sam’s Club stores in Manhattan or Brooklyn, and the company cedes the nation’s largest city to Amazon.
Couldn’t Wal-Mart open a warehouse/fulfillment center somewhere in or near New York and at least try to compete? Just because the company has never done that before does not mean that it shouldn’t try. Sales growth has been anemic at best, and maybe fulfilling orders for customers rather than trying to entice them into some megastore will juice up revenues.
Or Wal-Mart could develop its own air corps of drones for the day that the FAA approves the aircraft for delivery work. But Wal-Mart is unlikely to do that either.
Wal-Mart should be feeling a little desperate. It is stuck with square miles of box store floor space that leaves it vulnerable to a competitor that can operate far more nimbly. And Amazon is considerably nimbler.
No, Wal-Mart will not disappear, but if the company wants to grow, at least in the United States, it needs to think of a way to compete or Amazon, among others, will poach even more of the world’s largest retailer’s business.