There is no doubt that Amazon is the lord of online retailing. According to the data released last month, although the total earning of Wal-Mart is 5 times more than Amazon, the market value of Amazon has exceeded the Wal-mart.
In order to exceed Amazon, Wal-mart has poured tons of money which is used to develop necessary facilities related to online and mobile retailing. In May 19th this year, Wal-Mart Stores Inc said that it would take a different approach to online growth than Amazon.com Inc by using its large network of stores as distribution points (Source from CNBC).
To be honest, these new efforts wouldn’t bear fruit in a short time. Let’s see what is the difference in terms of warehouse logistics and the scale of online business.
Warehouse logistics center
First let’s see a map of fulfillment centers of Amazon.
The fulfillment center (FC) of online retailing is quite different from the traditional distribution center (DC). Actually many people don’t agree. In that case they don’t know the how difference about the distribution cost between Wal-Mart and Amazon because they still think that Wal-Mart has world-class logistics and supply chain systems.
Indeed, the supply chain of Wal-Mart is the best one in the world only consider that transport products from logistic centers to shopping malls. But from the perspective of online retailing, the supply chain of Amazon is better than Wal-Mart. It cost 3-4 dollars per customer on average for FC, but for DC the number is 7-9.
Amazon has 50 FC and Wal-Mart has 11 FC and 42 DC. However, it costs more in terms of transport products from DC to customers. Thats also the reason why Wal-Mart only guarantee the delivery in 3 days and Amazon is able to delivery in 2 days.
Now we see the gap of FC between Wal-Mart and Amazon. Even Wal-Mart has been growing the amount of FC recent years, it still takes time to chase Amazon. Unfortunately, their income of online retailing will be less than the money that they put before they catch up with Amazon. On the other hand, investors will not buy too much stocks unless Wal-Mart can get a significant profit. And we also need to know that Amazon will never stop.
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