After a brief history lesson on U.S. retail, tech industry analyst Ben Thompson illustrates what Walmart did wrong in his appropriately titled piece, “Walmart and the Multichannel Trap”:
instead of starting with customer needs and working backwards to a solution, Walmart started with their own reality and created a convoluted mess. Predictably it failed. (…)
Much of Walmart’s economic might derived from a logistics system that included distribution centers serving clusters of stores, connected by Walmart’s own trucking fleet (and before the Internet, the world’s largest private satellite communication network). That seems on the surface like a useful tool for e-commerce, until you get into the reality that shipping individual items at all hours is a very different problem than shipping pallets to stores once a day (I would analogize it to Microsoft trying to port the start menu from the desktop to a mobile phone), and solving for one business increases costs and complexity for the other.
Multichannel strategies are considering the company’s existing cost structure not its customers or market. (Think about it this way: Has any new online retailer started building up a chain of brick-and-mortar stores to base their operations on? Why not?)
Walmart can theoretically escape the multichannel trap by making Jet.com the outpost that gets ressources from Walmart but no constraints through its existing structures, letting Jet.com build up a genuinely new business alongside Walmart. (It’s the textbook answer to disruption.)
In reality though, Jet.com founder Marc Lore will become the executive to be in charge of both Jet.com and Walmart.com. With this constellation, chances of success appear to be slim.
* Why Walmart Bought Jet.com for $3.3b, In Walmart’s Own Words
* Jet.com Will Be a $3 Billion Acquihire
* Walmart & Jet.com as “two survivors of a nuclear apocalypse meeting on the wasteland”
* What a Potential Exit of Jet.com to Walmart Would Mean
* WSJ: Walmart in Talks to Buy Online Retailer Jet.com