The Grocery Wars Heat Up...

"Am I really here?" I thought to myself. I could already feel my blood pressure rising and I hadn't even opened the car door. I stared intensely ahead at the cause of my anxiety.

It was hard not to miss, the building covered nearly an entire street block, a full rectangle with few windows, garage sized doors bathed in heavy, stadium lights. And even at 7PM on a Friday night, it was bustling with people.

But then again it was always busy regardless of the time, it was one of the reasons I disliked coming here. Yet it could not be helped, somehow fate, the unusual wet winter or the traffic gods had been on my side. Here I was.

Shaking off my procrastination, reluctantly, I opened the door, sighed deeply, trudged through the vast parking lot, then the masses of people and past the door of the well-known brick and mortar grocery store.

Yes, the source of my discontent was a large brick and mortar store. It's one of the few millennial traits I actively embrace. As a household of one with limited square footage, I see no reason to purchase a twenty four pack of toilet paper or a giant bushel of apples (even if my brother and mother ardently profess the unit cost savings). I'm the type of girl who stops ~2 per week at my local, smaller grocery or farmers markets (yes, where one typically pays more).

I realize that's not the case for many Americans. In fact, a large portion of the population regularly shops at Walmart, Sam's Club, Costco or Kroger. Blame proximity.

As The New York Times noted last year, these retailers have aggressively expanded to the point where there's a Walmart within 10 miles of 90 percent of the population. Crazy, right? (Although upon a Google search, the closest Walmart to my house is 13 miles).

Proximity plays a large role but another important muscle Walmart and these large retailers have is pricing power. Walmart has perfected this over the decades with their emphasis on low prices (recall their successful ad slogan of over 19 years, "Always Low Prices?").

Premier location + low price. It's a powerful, nearly unbeatable combination. That is, until recently.

Unsurprisingly, enter "Amazon" of the FAANGS (since this is a technology blog), who changed the shopping habits of millions of Americans. In need of more laundry detergent? Need more office supplies? Groceries? All available on Amazon with just a simple tap and 1-2 days later, it's at your doorstep.

I cannot stress how deadly this functionality is to large retailers like Walmart. No longer do I have to hop in my car, fight hundreds of other shoppers for a parking spot, walk the aisles of the store, wait in line at check-out and then drive home, unpack and then…the realization that I forgot something. A vicious cycle and one I loathe.

With Amazon, I can do it all remotely. They made that possible. And Walmart realized how problematic that was very late in the game.

Problematic in the sense that millennials like myself value convenience. As indicated by my comments above, I'd much rather interact with a user designed interface from the luxury of my couch or gym than be physically present. Amazon makes that happen.

This change in consumer behavior would be less scary if these large retailers had invested time in e-Commerce…but they have not.

Walmart.com is not the poster child of a robust e-Commerce site. Nearly all of my previous shopping attempts on the site in the past five years have ended in frustration - either I cannot find the product I need or it could not be delivered within an acceptable time frame. As someone who considers herself value conscious, I find myself willing to pay more for convenience than value (i.e. Amazon > Walmart).

To be clear, Walmart has been redesigning their dot com site, but to me it's still a strong work in progress.

Walmart also sees the trend towards convenience. Their problem is - like Napoleon, they are embroiled in a two front war. In one corner, they are fighting to retain market share among the large competition of retailers.

Interested to learn more about the retailer wars - see The Motley Fool comparison of Costco vs. Walmart.

In the other corner, they are struggling to catch up on the e-Commerce side. And their competition has wasted no time. Amazon has aggressively pushed into the grocery space in the last three years, starting in the upper quadrant of premium and moving towards the center.

• June 2017 - Amazon purchases Whole Foods

• January 2018 - Amazon opens its first brick and mortar store, Amazon Go, in Seattle

• September 2018 - Amazon discloses it plans to open up to 3,000 Go stores by 2021

• March 2019 - Amazon announces plans to open grocery stores, distinct from Whole Foods or Amazon Go

Prior to the March grocery chain announcement, Walmart and Amazon had only moderately clashed. Now, with this most recent announcement, conflict between the two is inevitable.

Don't jump to conclusions, however, and consider Amazon the automatic winner. Visiting Bentonville last year taught me one thing - never count Walmart out.

Sensing impending conflict, Walmart has embarked on a massive shopping spree - buying over 10 companies in the last three years - all heavily rooted in e-Commerce - across multiple industries and in different countries.

United States

Men and Women's Clothing? Check. (ModCloth or Bonobos)

Shoes? Check. (Shoes.com)

Grocery delivery? Check. (Parcel)

Everyday items? Check. (Jet.com)

Side note - it's even been experimenting using employees as couriers for grocery or store deliveries.

Outside the US

Going big in grocery -

Flipkart (sometimes referred to as the "Amazon of India")

Cornershop (Mexico/South America)

Rakuten (Japan - partnership)

JD.com (China - partnership)

And in the past week, Walmart announced two other interesting countermoves. Another acquisition - an analytics company. Aspectiva, that specializes in AI - specifically, recommender engines to assist customers browsing online. The other…it's moving into online advertising.

Indeed, analytics and advertising are two spaces Amazon plays in.

You may be scratching your head wondering what Walmart is doing. It certainly has its hands in many pots in particular the e-Commerce side. Yet, it has made little attempt to integrate most of the companies under the Walmart name or URL (i.e. ModCloth still retains its own URL). From my perspective, there's a few reasons for that.

First, Walmart wants to move beyond its established brand. The name Walmart carries immense power but also certain expectations - large stores with low prices. The typical demographic is where price sensitive customers shop.

Owning separate brands allows Walmart to compete outside of those restrictions. Indeed, the trendy Bonobos advertises and sells wool suits for $500 - a price few regular Walmart shoppers would pay.

Note - This play is not unique to Walmart, big beer companies like Anheuser-Busch have made the same play in the last decade imbibing companies like Goose Island, Wicked Weed, Golden Road, and Devil's Backbone to name a few. In fact, in 2018, Anheuser-Busch became the largest craft beer company in the United States.

Second, although costly, Walmart is attempting to grow and execute a multi and omnichannel approach.

As a refresher, omnichannel is the combination or integration of channels, experience and message. This means that as a customer I should have a similar experience and see similar products regardless of my entry point - desktop, mobile, app, telephone, retail store, etc.). All of the experiences should complement each other. Some examples of omnichannel retailers can be found here.

Amazon has done a brilliant job executing an omnichannel approach with Whole Foods. If you've visited Whole Foods lately, you are now likely to see Amazon products (i.e. Firestick, Cube), services (i.e. grocery lockers, delivery) and perks (i.e. "Prime customers get 10% off!").

Walmart wants to do the same thing with the e-Commerce companies it has been collecting - stock merchandise from these new brands in its stores, utilize their first class supply chain logistics for synergies and get data from each of these customer bases.

So far, I'd say that Walmart is doing a decent job executing on the first two. Some investors are more bullish on Walmart's prospects - including The Motley Fool who went as far to call Walmart "an e-commerce powerhouse" earlier this month.

Where it will be strongly tested, in my humble opinion, is how it decides to use and sell data in the form of online advertising.

Although it sounds easy - collecting data and turning that data into valuable insights (i.e. recommender engines or advertising) is a difficult undertaking. And there's a lot of companies playing in this space with big head starts (i.e. Google, Facebook, Amazon, AT&T recently entered the space as well). It can buy as many e-Commerce businesses as it pleases but if it cannot find a way to integrate customer data (i.e. identify that Mary shops at both ModCloth and Walmart), it's not going to be successful.

Some of my skepticism, to be honest, is rooted in history. This is Walmart's second foray into online advertising. As The Wall Street Journal mentions, Walmart tried to jump into advertising in 2014 with the introduction of Walmart Exchange (WMX). Spoiler alert - it did not work.

If it truly wants to succeed in online advertising, Walmart needs to avoid making the same mistakes. Early indicators are encouraging - it's consolidating its brick and mortar and online advertising agencies for starters. But it's one thing to plan and another to execute.

The groundwork for conflict is being set and I for one am ecstatic to see what each has in store.