In this four-part series, we’re taking you on a deep dive of today’s brand manufacturers’ top challenges to provide clarity on the current market environment and empower you to adapt faster.
Amazon and Walmart, two of the largest and most influential brands in the world, are in the midst of a retail battle that continues to make headlines. As the lines separating traditional and online retail continue to blur, competition is heating up and the stakes are higher than ever. In an attempt to win customer loyalty in this new era of retail, both are dropping prices at a rapid rate. The result? An uncertain future and dwindling profit margins for brand manufacturers.
Here is a quick recap of each retail giant’s place in the market and how today’s brands can respond to the escalating pressure.
Walmart: The Brick-and-Mortar Kings
On a mission to help customers save money and live better, Walmart is the top brick-and-mortar retail store in the world. With the recent launch of a new website, announcement of free 2-day shipping, and a large investment in new technology, Walmart is taking an aggressive approach to compete for the top spot online as well. In the first quarter of 2018, Walmart grew eCommerce sales by 33% and increased revenue by 4.4%. Despite this impressive momentum, gross margins decreased by 23 points, in large part due to pricing pressures brought on by Amazon.
Amazon: The eCommerce Gold Standard
Amazon, the most customer-centric company in the world, is the uncontested winner of the eCommerce space. Amazon’s first quarter earnings allowed the company to increase revenue by 43%. In an effort to compete with Walmart in all aspects, however, Amazon has recently begun building up their brick-and-mortar capabilities with Amazon Go.
Here is a cross-comparison analysis of each retailer’s prices:
Responding to the Retail War
As Amazon and Walmart continue to cut prices to compete with the other, brand manufacturers are struggling to turn a profit. The group taking the hardest hit? Those overly reliant on these third party sales channels to reach their customers.
In an effort to meet each retailer’s growing demands, brands are being forced to rethink their sales strategy. While the answer is far from simple, not all hope is lost. A diversified, multi-channel sales strategy can help brands rediscover profitable growth. Many are adopting a direct to consumer approach to face the realities of a new retail environment and meet the changing needs of their customers.
If you are brand manufacturer struggling to navigate the increasingly complex market, we are ready to serve as your partner in profitable growth. Contact our team to learn more.