The gathering momentum of the internet revolution is visible in the changing fortunes of e-commerce retailers like Amazon and the world’s largest conventional store based retailer, Wal-Mart.
The scorecard at present reads 55 to 14 with Amazon ahead by a big margin. Amazon stocks are up by 55% this year after climbing to record highs on Friday while Wal-Mart stocks have declined by 14% during the same period.
The Amazon Prime Day, which was held on 15 July, was a resounding success according to most reports with Greg Greeley, vice president of Prime saying in a statement, “After yesterday’s results, we'll definitely be doing this again.”
Ad Age reported that Amazon (AMZN, +1.5%) sold 34.4 million items globally on Prime Day which breaks down to 398 items per second. Sales for the day were 266% up on the same day a year ago.
The privileges and special offers made available to Prime members on Prime Day included free shipping for two days on thousands of items, unlimited streaming of thousands of TV shows and music, free access to about 500,000 kindle titles and most importantly, access to the sales available on Prime Day.
The threat from Amazon has prompted what could be described as a knee-jerk reaction from Wal-Mart with the recent rolling out of an unlimited shipping service for $50 per year as well as the announcement that it would also offer its own deals day.
Piper Jaffray analyst Gene Munster said that he believes the Wal-Mart (WMT, -0.60%) response comes from a position of weakness, “Wal-Mart’s attempts to create a competitive offering to Amazon shows the power Amazon is exerting as it gains loyalty and takes share from traditional retailers. We think Wal-Mart's response to Amazon indicates it is grasping for anything to attack Amazon.”
Wal-Mart Chief Executive Fernando Madeira took a swipe at the $99 Prime membership charge saying that the idea of asking customers to pay a fee in order to save money didn't add up.
Munster pointed out the anomaly that Prime Day included a free trial of the Amazon Prime service, so the comment from Madeira missed the mark completely. In addition, Wal-Mart owns Sam’s Club, a membership-based bulk retailer with a focus on providing lower prices for a membership charge.
The reaction from Wal-Mart does however underscore the degree of concern traditional retailers have regarding the advances being made by e-commerce retailers such as Amazon.com.