Amazon’s absolute reign is about to end

Alex Barrera
16 min readFeb 26, 2018

This story was first published in The Aleph Report. If you want to read the latest reports, please subscribe to our newsletter and our Twitter.

It’s not Software that’s eating the world; it’s With their stellar 2017 earnings, they’re obliterating every market they get into.

As much as I love Amazon, they’re becoming increasingly problematic. Their hold on cloud computing, voice control and online retailing is complete.

This tight grip on vertical markets is creating a serious lack of competitiveness. Anyone that wants to go against them faces a nearly impossible task. Those that rely on the Amazon platform are subject to the unyielding grip of the retail titan. It’s either sell through them or face oblivion.

As Amazon expands into other vertical markets, more industries will feel Bezos’s wrath. Now it’s the turn of groceries, logistics and in a very close future, pharma.

Google can’t compete with Amazon. Neither can Apple. Amazon’s domain seems to be unchallenged. Some are calling for an urgent review of antitrust regulation in the US. But we all know that’s a patch. We need an Amazon challenger.

Apple vs Amazon vs Google vs Facebook stock performance

Is there such company? I am surprised to admit that there is. But you won’t believe me. The most likely Amazon nemesis is called Walmart, and it’s being spearheaded by one of the smartest minds in the retail space, Marc Lore.

The new new Walmart game

I’ll give you a little more time to stop laughing. I had the same reaction. Am I serious? After looking at the research, I am. Walmart has taken a 360º change in digital strategy that, not only is working, but it’s already putting pressure on Amazon. The emergence of a real incumbent is forcing Amazon’s hand. The pressure is creating gaps that others are using to extricate themselves from Bezos’s grasp.

Let’s start at the beginning.

Despite Walmart’s size, they’ve always neglected their ecommerce business. When you’re the top corporation in the world and your market value is 485 billion dollars (35% more than the second largest), the lack of interest is understandable.

“The philosophy created problems on the web, though. Whenever the online price dropped below the in-store price, the merchants in Bentonville would balk. They were worried about siphoning away customers from their stores, which account for more than 97 percent of Wal-Mart’s sales.”

Can Wal-Mart’s Expensive New E-Commerce Operation Compete With Amazon

Forbes 500 2017 List

During the years they’ve tried different strategies, with mixed results. Meanwhile, Amazon has kept growing at a 24% yearly average, while Walmart barely hits a 1.7%.

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If both companies maintained the same growth multipliers, Amazon could overtake Walmart in six years. Let me repeat this, six years.

Still, it wasn’t until 2015, when Doug McMillon took the Walmart CEO chair, that things started changing in the digital space. McMillon has a very different background from his predecessor, Mike Duke. He’s not only 17 years younger but has also been at Walmart longer. He rose from the lower ranks, working on many of the strategic areas that make Walmart the retail juggernaut that is.

I bring this up because Doug McMillon is the person that has enabled the biggest strategic shift at Walmart in more than two decades. That takes, not only an exhaustive knowledge of the organization but incredible courage.

“I want us to sell VR before the customer is ready for it,” he says. “I keep telling our folks, ‘Buy a little and put it online, put it in 50 stores.’ Don’t tell me it won’t sell unless you try it. You gotta catch the wave. And to catch the wave, you gotta be early.”

Doug McMillon — Can Wal-Mart’s Expensive New E-Commerce Operation Compete With Amazon

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In 2016, he made one of the boldest moves the retail industry has seen, the acquisition of The company, one-year-old at the time, lacked positive income and a major market share in the online retail space.

Similar Web Analysis 2016

The operation raised eyebrows all over the industry. The reason wasn’t the acquisition itself, but the price, 3.3 billion dollars.

After the acquisition, McMillon promoted’s co-founder and CEO, Marc Lore, to president and CEO of Walmart eCommerce US. And just like that, Walmart’s CEO handed the keys of the kingdom to Amazon’s most dangerous nemesis, Marc Lore.

“They were assigned perhaps the most urgent rescue mission in business today: Repurpose Wal-Mart’s historically underachieving internet operation to compete in the age of Amazon. “Amazon has run away with it, and Wal-Mart has not executed well,” says Scot Wingo, chairman of Channel Advisor Corp., which advises brands and merchants on how to sell online. “That’s what Marc Lore has inherited.”

Can Wal-Mart’s Expensive New E-Commerce Operation Compete With Amazon?

Meet Marc Lore

Marc Lore — Inc. Magazine

Marc isn’t a stranger to online retail or Amazon. In 2011, he sold his family online retailer company called Quidsi to Amazon for 545 million dollars. He spent two years at Amazon and left the giant as soon as his contract allowed him.

“And it was this really depressing sort of moment where we didn’t even want to go out for a drink. It wasn’t a celebration — it was sort of like mourning. That’s what it felt like. And it was really weird. We were like, ‘Why do we feel so bad right now?’ Like, we just sold this company and made a lot of money, and we just didn’t feel great.”

Marc Lore, (Success!, How I did it BI Podcast)

The time before the acquisition became an all-out war between Amazon and Quidsi, between Bezos and Lore. In the end, Amazon flexed their financial muscle and beat Quidsi into submission.

After leaving Amazon, Marc took one year off. He was bitter and disappointed with the way Bezos handled Quidsi. In 2014, he came back and started working on an Amazon killer,

“There’s this huge middle class of people that are going to be spending more and more dollars online, and for them, it’s going to be all about price,” Lore says.

Amazon Bought This Man’s Company. Now He’s Coming for Them

Two years later, he ascended to become’s new US CEO. Armed with, and a 485 billion dollar war-chest, he was ready for payback.

Walmart’s online strategy

Walmart has deployed a wide range of strategic changes to aid them in their battle against Amazon.


The first ingredient to take on Amazon? Increase your inventory. Bezos’s obsession has always been to become the everything store. The first thing you need for that is, well, everything.

Since Lore took over, increased their inventory four-fold, offering over 40 million products. Amazon though, has an inventory of north of 350 million products, nearly nine times more.

Lore knows he can’t compete head to head with Bezos. That’s why, while increasing the inventory is a priority, Walmart isn’t adding just anything.

During the past year, the retailer went on a startup buying spree, acquiring Shoebuy (shoes), Modcloth (womenswear), Moosejaw (outdoor apparel) and Bonobos (menswear) to their marketplace.

Lore is betting on the vertical fashion angle, something he knows Amazon isn’t good at. Deep down, the strategic move is brilliant. They focus on niche markets, taking good care of their clients while delivering a great experience. They can’t compete on quantity, but they can do it in quality, both regarding customer service and product quality.

Price wars & logistics

The reason why fits nicely with Walmart is that they are both driven by the same mission, give their customers the best deal.

“The Jet concept of sharing savings with customers is a very Sam Walton-like idea,” says Richard Cook, co-manager of the Cook & Bynum Fund, which owns Wal-Mart stock. “You will help us lower costs, and we will share that savings with you.”

Can Wal-Mart’s Expensive New E-Commerce Operation Compete With Amazon?

To achieve that, Lore incorporated to two of his favorite tricks from The first one is to increase the customer’s average order, so they can aggregate volume and lower the shipping costs. Lower costs mean better prices for the client and better margins for Walmart.

“Shipping one unit is ex-pen-sive,” McMillon says, drawing out the word. “It costs five bucks to ship one item, seven bucks to ship seven. So when you aggregate volume on the supply side, the economics change in your favor.”

Can Wal-Mart’s Expensive New E-Commerce Operation Compete With Amazon?

Another way of lowering the price is taking advantage of Walmart’s brick and mortar operations. With 4700 stores in the US alone, the retailer has a massive physical footprint. By levering the existing infrastructure, they can also save on shipping costs.

Do you want to save more on your groceries? Order online, but pick them up at your local Walmart. A classic move.

Piggybacking on the current infrastructure is something Amazon can’t do. For them to achieve this, they would need to build the physical stores, adding years and billions of dollars to their operation. Lore is intent on exploiting this advantage as much as possible.

“Every day, I become more and more convinced about the omnichannel advantage,” Lore said, referring to a sales strategy that combines online and in-store shopping.

Wal-Mart Unveils ‘Store №8’ Tech Incubator in Silicon Valley

Segment targeting

They cornerstone of Walmart’s new strategy is to segment their audience. Walmart’s traditional target has been price-sensitive customers, those looking for the cheapest deal.

While Amazon started with those customers too, they’ve moved away from that. Their focus is now on their PrimeNow scheme, not on selling the cheapest products. The company now uses massive discounts as a way to pressure and cajole their partners or potential competitors. They can do price dumping if needed, but it’s not the general strategy anymore.

Nevertheless, most people are still price-sensitive online. Walmart is combining their lower prices strategy,’s saving schemes, and a brilliant millennial targeting tactic.

Most millennials don’t care much about getting the widest product selection range (29% — 32%). They want products catered to them and them only. They want to feel special. But at the lowest price.

Lore’s recent startup acquisitions follow this formula. Smaller product range and saving options for a highly sophisticated audience. A segment Walmart never touched before.

Another example of the same strategy is the launch of the ‘Uniquely J’ brand. A grocery brand catered to millennials both regarding price and user experience.

Amazon is counteracting Walmart by buying Whole’s Foods. The former had certain customer overlap with Walmart. After the acquisition, they slashed prices, in an attempt to poach Walmart’s user base and focus on millennials. That’s a price war Amazon won’t win though. Worse, they devalued Whole’s Foods prime segment, wealthy individuals.

Either way, it’s a great bet. Amazon, while good at building horizontal businesses, is bad at personalization. Amazon never got the user experience right. Millennials and the newer generations are very sensitive to this. Walmart and Lore’s team have a good chance of besting Bezos to that segment.

Team culture

Another big advantage, often undervalued, is’s corporate culture. Marc didn’t come alone. He brought most of his people with him. People that follow him and that work as a team.

On top of that, Lore is placing each acquired startup CEO as his deputy. Each one manages their company’s vertical. Making use of the startup CEO’s expertise and empowering them within the larger organization is a great move. Marc is aligning their acquisitions with the overall online Walmart strategy.

This might not seem like an advantage, but it is. It offsets the lack of technology Walmart has. The company is in need of innovation and fast. Nonetheless, acquiring startups without a smart process to assimilate both the technology and the talent, is a recipe for disaster.

Marc’s own experience when Amazon acquired his previous company is the perfect example. You spend money, retain the talent for some years and then the churn rate spikes.

If Walmart wants to win this race, they have to bet on the long-term. That means investing in their culture and their people.

Market expansion

Historically, when it comes to international markets, Walmart hasn’t fair too well. They’ve had a hard time in Europe and in Asia, to name a few.

This has changed drastically with McMillon. As I said before, the company’s innovation capabilities are small compared to Amazon. Trying to enter fast-moving markets like China, while competing simultaneously with Alibaba,, and Amazon is insane.

“According to Nielsen, 11% of total retail sales in China come from e-commerce, compared to 8% in the US. And e-commerce sales in China are growing at a rate of 53% annually, compared to roughly 12% in the US.”

Walmart’s future in China increasingly depends on a single Chinese company

This is where McMillon has taken a brilliant path. Instead of investing in building local operations, he’s started partnering and buying into the local incumbents. But not any incumbent, but those currently in an open war with the number one online retailer.

In China, Walmart is partnering with to take on Alibaba. Amazon was already cornered by both Chinese players. Walmart, instead of making the same mistake, is now betting on JD and Tencent, to disrupt Alibaba. Not only that, but JD is bringing the war to Amazon’s US turf with help from Walmart too.

“Meanwhile, Walmart has steadily increased its stake in JD–from 5% in June 2016, to 10.8% in October, and then 12.1% this past February.”

Walmart’s future in China increasingly depends on a single Chinese company

In Japan, Walmart just announced a similar move. They partnered with Rakuten to achieve a dual goal. On one side, they entrench themselves in Japan and help Rakuten defend their top retailer spot against Amazon Japan. With Walmart’s products getting sold through the Rakuten partnership, the Japanese firm can counteract some of Amazon’s Japan allure. At the same time, Walmart is importing the Kobo to the US to both, compete with the Kindle and to increase their online book’s footprint.

“The move echoes deals that Rakuten has made to place Kobo e-readers in major bookstore chains around the world, such as WHSmith in the UK. Physical retail presence is a potential advantage for Kobo, which doesn’t have the book selection or brand recognition of Kindle but is competitive in terms of hardware — the bigger-screened, water-resistant Aura One, for example, beat Amazon’s similar new Kindle Oasis to market by more than a year.”

Walmart and Rakuten take on Amazon with Kobo e-reader alliance

Marc Lore isn’t deluded. He knows he won’t be able to compete with Amazon in certain categories. However, putting pressure on key Amazon verticals like publishing gives authors, editors, and publishers another potential platform to operate in. This unclenches the grip Bezos has on particular markets. It allows for better deals for providers and a continuous eroding of Amazon’s bottom line.

“There are certainly areas where we are playing defense, and we’re behind and need to catch up,” Marc Lore, chief executive officer of Wal-Mart’s U.S. e-commerce business, said at the Bloomberg Breakaway Summit in New York Wednesday. “One example is the long-tail categories that we’re going after with acquisitions.”

Wal-Mart Web CEO Says He’s Still Playing Catch-Up to Amazon

Last but not least, Walmart is taking on Amazon in India. They’re replicating the same move from China. They’re in talks to buy up to 20% of Flipkart, India’s Amazon competitor. If you pair this with the recent Softbank investment in Flipkart, it’s clear that there is a vested interest to vanquish Amazon from India.

McMillan’s vision is clear. To compete with Amazon, they need to win the fast-moving international markets. To achieve that he’s focusing on investing and supporting the local players with cash and resources.

Walmart’s Open Innovation approach

Walmart isn’t a technology company. Amazon though was born in the midst of the dot com. It’s DNA has always been technological. Walmart, on the other hand, has been the quintessential brick and mortar.

As I’ve pointed out many times though, technology isn’t a vertical industry anymore. For a while now, it’s become a horizontal industry. One that touches every other industry.

In 2011, Walmart started getting serious with technology and bought, among other smaller companies, Kosmix, a semantic technology company from Silicon Valley.

Kosmix founders became the seed for what’s now called Walmart Labs, the innovation heart of the company. The Labs team has produced some outstanding things but still pales in comparison to the Amazon’s machinery.

One of the things Walmart Labs can’t do is disruptive product innovation. They work in innovating internally, but for a while now, the company has lacked a true outside disruptive engine.

This all changed with the announcement of Store Nº 8, Walmart’s startup incubator. More than an incubator, I would say, it’s a startup studio. It’s an independent entity that enables Walmart to capture innovations from outside the organization. It operates as a bridge, connecting both sides, the startup world, and Walmart Labs.

“The goal is to have a fast-moving, separate entity to spot emerging technologies that can be developed and used across Wal-Mart.”

Wal-Mart’s Tech Incubator Hires Co-Founder of Rent the Runway

So far they plan to spin out five ventures by 2019. To date, we know of four of them. The first one, called Code Eight, was unveiled not long ago. Their mission is to build a personal shopping service for “busy NYC moms.” Once more, we can see the new strategy pouring over the incubator direction too. Code Eight is one of Lore’s experiments in trying to develop new retail experiences for high-end customer segments.

Another of those ventures is Project Kepler, Walmart’s attempt at the next generation grocery store. The startup looks very similar to Amazon Go. The fact that Amazon was first to it shows, once again, the innovation speed differential between both.

The incubator is also doubling down on VR technology. They just announced the acquisition of Spatialand, one of the reference VR companies in the world. Walmart has been eyeing VR for a while now. While some of their prototypes were just flashy toys, some of the uses they’re exploring are bringing great results.

“He says the company uses Strivr in about 187 employee training centers, for three types of training: preparing for situations like Black Friday or emergencies where you can’t set up a simulation in a store, learning customer service, and teaching operational stuff like how produce should be stacked and arranged.”

Finally, a Useful Application for VR: Training Employees

Technology, Walmart’s pending subject

Walmart is far from being a technology juggernaut, but it’s doing a great job at catching up. One of the most impressive things is the kind of people they’re luring into Store Nº8 projects.

One would think most engineers would balk away from the old-school brand. But it seems Store Nº8 is creating a certain gravitas. I don’t doubt for a second that it’s another of Lore’s effects.

Marc has imprinted with a startup DNA. That’s one of the hardest things for a mammoth corporation like Walmart.

Still, Walmart tends to lean on partnerships instead of owning their technology. For the time being this might be good enough, but eventually, it will fail. Controlling your technology stack is critical for the long-term survival of Walmart.

I want to believe these are just the first steps and that in the future we’ll see Walmart Labs crack some unique products like Alexa or AWS. To achieve this though, technology needs to become even more prominent, and Walmart needs to think even further into the future.

Strategy lessons from Walmart

As improbable as it might look, Walmart is the toughest competitor Amazon has right now. Under the McMillon and Lore, the retail giant can bring real thunder to the market, breaking the Amazon yoke.

So far, their strategies, even though they’re pretty recent, are paying back handsomely. The next three years will be critical for the fight, and Walmart needs to speed it up if they want to break Amazon.

There are some great strategic takeaways other businesses can use in their markets.

  1. Hire visionaries and fighters. Pick someone that has the experience and the drive and let them do.
  2. Break your core values. No company can change if they keep ascribing to old, nonoperative values. Fast-moving markets and technology requires flexible and reviewed values.
  3. Don’t go head to head against someone stronger than you. Make sure you identify the weak spots and focus on them, not on the stronger side.
  4. Identify those things the competition can’t do due to their current cost structure. Exploit it.
  5. Invest in your corporate culture. If you want to compete, you need innovators. To retain talent, you need to deserve it. Poaching employees from the competition is easy when your corporate culture is better.
  6. Invest in a technology organization. This one is pretty obvious, but hard to implement. Build a powerful technology stack and use it to deploy future products. Having a “tech” department isn’t enough. The whole company has to be technology driven.
  7. Your enemy’s competitors are your friends. Find critical markets beyond your local one. Partner with the incumbent and negate those markets to your competitor.
  8. Develop an open innovation approach. Most organizations get this wrong. Open Innovation isn’t just about working with startups. It’s about building the processes that allow inside and outside innovation to cooperate and deliver future products or services.

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Alex Barrera

Chief Editor at The Aleph Report (@thealeph_report), CEO at, Cofounder & associated editor @tech_eu, former editor @KernelMag.