As the nation faces gradual reopenings in all 50 states over the next few weeks, U.S. consumers coming out of the pandemic won’t be quite the same as they were going in. Concerned about their health – and the health of those around them – a growing share of people who have gone digital intend to stay digital, even when they’re legally allowed to resume their former daily activities.
In their race to capture the consumer’s whole paycheck, Amazon and Walmart have focused this week on the “great digital expansion,” with the goal of finding new ways to reach consumer spend going forward.
Big Play of the Week: Prime Day’s September Reset
Amazon had already announced a few weeks ago that it would delay the company’s annual Prime Day from its regular July date, but only confirmed this week that the event would be happening at all.
The shopping giant has announced plans to hold Prime Day 2020 in September. The two-day shopping event will feature sales on a wide range of merchandise.
Prime Day’s postponement came when Amazon was struggling in the pandemic’s early days to resolve big shipping and staffing woes. An initial explosion of online orders left Amazon overwhelmed, forcing the company to temporarily reprioritize its operation toward mostly delivering key household items.
But since then, a 175,000-person hiring spree and a $2-an-hour boost in worker pay has seen those issues mostly subside. As a result, the waiting list to get a time slot on Amazon Fresh is largely gone.
“We’ve removed the invite list in most cities, and more than 80 percent of eligible Prime members are able to shop without requesting an invitation,” the company said on May 12. “We removed quantity limits on products our suppliers can send to our fulfillment centers.”
Prime Pantry is also back after being unavailable for nearly two months. So, with things moving back into more normal territory, Amazon is once again on track with Prime Day. But the unanswered question is whether consumers who are more digitally oriented but economically hard-hit will respond with excitement levels consistent with previous years’ Prime Day events.
Expansion Play 1: A Push Into Gaming
The pandemic has been a boost to online gaming, as consumers are both buying more games and subscribing to services more often to play together.
Amazon moved this week to surf the growing wave of gaming enthusiasm with the launch of a PC video game called “Crucible,” which bears similarities to popular titles like “Overwatch,” “Fortnite” and “League of Legends,” according to Amazon’s description.
“Crucible,” which is free to play, is the first big-budget game that Amazon Game Studios has released since the unit’s 2012 launch. It also marks the unit’s first diversion away from the tablet games the division has been producing.
Wedbush Analyst Michael Pachter speculated that the release could represent Amazon dipping its toe into the gaming industry before carving out a larger niche, much as it has done with books and movies.
Pachter doesn’t believe Amazon will be deterred if “Crucible” isn’t a hit. He thinks the company will keep tweaking its model with future games until it gets it right.
With the launch, Amazon joins Microsoft as one of two Big Tech firms pushing PC gaming products in a big way. But the two may soon have company, as the changing economy has made the virtual gaming space a more attractive destination.
For example, Google has launched its own game streaming service called Stadia, purchasing space in Montreal to do so. The service allows people to stream games onto their electronic devices without owning the respective consoles.
Expansion Play 2: Free Kindle Unlimited
When the going gets tough, the tough start reading – and Amazon is aiming to make sure consumers do so with a Kindle device or app.
The company recently announced that it’s giving away two months of its Kindle Unlimited service, the so-called “Prime Video” of reading. That includes unrestricted access to more than a million titles, and a fairly large bundle of popular magazines and audiobooks.
The offer is valid for all new customers who subscribe before midnight on June 30. However, there’s a catch: Former Kindle Unlimited subscribers or those who have already subscribed and withdrawn in the past don’t qualify and must pay $9.99 a month.
Big News of the Week: The Great Q1 Digital Explosion
Walmart’s first-quarter earnings hit the tape this week – and demonstrated that consumers rushed to Walmart both physically and online in the pre-pandemic era to prepare.
They especially stocked up online. While Walmart’s same-store sales increased 10 percent (beating analyst forecasts), online sales soared more than 74 percent year on year.
“Our business fundamentals are strong and our financial position is excellent,” Walmart Chief Financial Officer Brett Biggs said when releasing the chain’s earnings. “Customers trust us to deliver on our brand promise, and I’m confident in our ability to perform well in most any environment. While the short-term environment will be challenging, we’re positioned well for long-term success in an increasingly omni world.”
The spike in digital sales got a boost from Walmart’s April 30 introduction of Express Delivery, which delivers grocery and other items within two hours. Walmart accelerated the service’s rollout as the pandemic unfolded. After piloting the program in 100 stores, the chain has made it available at 2,000 sites.
CEO Doug McMillon tipped his hand on the company’s eCommerce success and Express Delivery’s expansion in a recent op-ed article.
“I think people have also come to see that the supply chain doesn’t just extend from a distribution center to the loading dock of a store. It goes all the way to the trunk of a customer’s car or their doorstep,” he wrote. “The so-called ‘last mile’ of delivery has become front and center. This is just speeding up the significant change the retail industry was already undergoing.”
Withdrawal of the Week: Walmart Grounds Jet.com
On the downside, it looks like Walmart’s attempt to take on Amazon with a digitally native brand of its own are over. After paying more than $3 billion for Marc Lore-founded Jet.com in 2016, Walmart this week quietly announced it is pulling the plug on the unit in the midst of the coronavirus crisis.
Jet.com, an online-only marketplace, saw its fate disclosed as part of Walmart’s first-quarter earnings report, with a positive spin put on the decision. The company referred to the move as a reflection of Walmart’s overall eCommerce strength.
“Due to continued strength of the Walmart.com brand, the company will discontinue Jet.com,” Walmart wrote. “The acquisition of Jet.com nearly four years ago was critical to accelerating our omni strategy.”
Changing Perspective of the Week: US CEO Says Digital Migration Could Be Permanent
While Walmart has scrambled to respond to the COVID-19 crisis, U.S. President and CEO John Furner told The Wall Street Journal that he expects many shifts in consumer behavior to become permanent – particularly the increased online shopping.
“It would be hard to say exactly how long any of these changes last, although I believe many of them will be permanent,” Furner told the paper. “We had some periods in the quarter when we saw as much as 300 percent growth rates with the [online grocery] pickup business.”
Furner further told the Journal that Walmart believes its store network and ability to fulfill consumer orders the same day will be the chain’s secret weapons in its ongoing attempts to “crack Amazon Prime. … The customer satisfaction scores we track on our pickup business have held up pretty well throughout the quarter.”
That’s what has kept Walmart performing well during the pandemic, and it will likely keep pushing Walmart forward when recovery really gets underway – or at least help the chain as much as anything can.
However, statements from both Amazon and Walmart this week indicate that an air of uncertainty hangs over the entire retail segment. Both companies are targeting their efforts to match the shifting consumer narrative. But which one ultimately does better in getting the consumer’s whole paycheck remains to be seen.