Wal-Mart, Amazon and the Looming E-Commerce Wars

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Wal-Mart, Amazon and the Looming E-Commerce Wars

Shoppers have more ways than ever to buy online, but as the e-commerce wars heat up and transform the holiday season, wallets won’t be the only casualties.

A long time ago, in a world where paper and pens ruled and the scent of sugar plums danced in the air during holiday season, people would make a list, check it twice… and then bundle up and head out to a store to do their holiday shopping. Shoppers would dutifully prowl the aisles amid a swarm of other harried, anxious shoppers, under stress to get the perfect gift at the best price.

Now, it’s much more likely that shoppers will simply settle down on the sofa, boot up their laptops or tablets — lists in hand — and peruse online rather than in front of ornately-decorated panes of storefront glass. These days, the UPS man has replaced Santa Claus as the holiday figure of choice, and Amazon has supplanted shops and big-box stores, who struggle to compete against the growing e-retail scene, which shows no signs of stopping.

This year, a whopping 96 percent of online consumers are predicted make at least one retail purchase during the holiday season, according to research firm IMRG. Consumers are increasingly shopping with phones and tablets as well: three in four mobile shoppers expect to buy with their smartphone this Christmas season, and nearly the same percentage of tablet owners expect to do the same.

Of course, brick-and-mortar stores still offer deep discounts to get foot traffic, but overall online shopping is now an established reality for buyers. Even beyond the holiday season, consumers increasingly head to the browser for the best deals and convenience, to the detriment of traditional retailers everywhere.

The shift has made Amazon the e-retail king, but a few Internet rivals are angling for a slice of the pie, offering even more options for shoppers to get their e-commerce fix. But as the landscape heats up with competition, the fallout of cutthroat battles begin to affect what’s on the shelves, and retailers are making strategic decisions to stay competitive in the long-term — even if it means short-term disappointment for customers who stay faithful to brick-and-mortar shopping.

Google Shopping

Google isn’t a store, but it’s inching into e-commerce with its Google Shopping comparison service, which now requires companies to pay to be included in shopping results. In the past, being included in results was a free service for retailers, but shoppers found it riddled with outdated product inventory and inaccurate prices.

Google says the change will improve its shopping results because retailers are more likely to list accurate and up-to-date items if they are paying for it to appear. The search giant asserts the addition of the listing fee will help reduce the clutter in product results, and ensure those provided are current and don’t mislead customers with incorrect information, like dated shipping prices.

“Incentives are aligned to make sure the data we’re receiving is of a higher quality,” said Sameer Samat, Google Shopping’s vice president for product management. “With better data, we can build a better experience for users.”

Some retailers agree and applaud this strategy, but others aren’t so enthusiastic to pay for listings and may decide to list fewer products, which in turn, could make Google’s result listings unsatisfying for customers who see them as incomplete. Still, buyers who use the service may find value in an accurate, quick comparison tool that helps them find the lowest price on a product, saving time in a season where time and resources are stretched for the limit.

Forcing companies to pay for inclusion in the comparison service, however, puts Google on a slippery slope — the company needs to generate more money from retailers, some of its most lucrative advertisers, but it also needs to improve product listings to keep valuable customers from going to Amazon.

These listings are replacing store aisles, and consumers used to surveying a wide sampling of physical goods carry that expectation into the online world. Plus, a big advantage to digital shopping is the technology’s ability to compare prices of similar goods across retailers, so the e-commerce site with the widest selection and most reliable price comparisons stands to gain a lot of ground.

Facebook Debuts Gifts

Facebook, like Google, isn’t an online shopping site, but that doesn’t mean it isn’t testing the waters, too. The social network announced it would launch a service called Gifts, which, as its name suggests, lets users send a sampling of presents, like chocolate, coffee, socks and other real-life presents, to one another.

The service promises to leverage Facebook’s social reach, creating a seamless shopping experience that can potentially take a lot of guesswork out of gift-giving. For those who struggle with just the right gift for a friend — or even remembering when someone’s birthday is — Facebook Gifts may make the process of shopping a lot easier.

Facebook is testing the service with a subset of users in the U.S. and plans to roll it out to a wider audience in the coming months. When it happens, people can begin to send gifts to each other by clicking a “gifts” icon on their Facebook friends’ pages, either on its website or on Android devices. An iOS version is coming soon.

As if the idea of shopping while interacting with your friends isn’t appealing enough, Facebook Gifts will prompt an icon to appear on the right side of users’ pages with the notifications for friends’ birthdays, weddings and other life events. For example, if your friend’s birthday is coming up in two days, you’ll now see a “give her a gift” link and the gift icon next to her name and photo.

Clicking it will display presents you can buy, such as a cupcake, a stuffed animal or a Starbucks gift card, and the recipient will be notified through Facebook to enter a shipping address for the presents. In some cases, they’ll be able to select their own cupcake flavors, the type of teddy bear, or exchange them for other gifts, illustrating how the social interaction can traverse traditional gift giving to make it easier and seamless on both ends. No need to remember where to send gifts and when — having that process integrated on Facebook will remember it for you.

The move represents Facebook’s first real foray into e-commerce, and gives the social network an unspecified cut from each item sold, which helps it generate revenue to offset ballooning expenses. Still, investors remain wary about its ability to monetize its services.

Facebook enjoyed explosive, mind-boggling growth since its inception, but it’s reaching a saturation point in several markets, so it needs to translate its popularity into cold hard cash to keep investors happy, especially in light of its bungled IPO this past spring.

And, beyond generating a transaction fee, Facebook’s Gifts could provide an avenue to boost its mobile presence and could play a role in delivering mobile ads to its massive user base.

Wal-Mart vs. Amazon

Just as Google and Facebook begin making their way deeper into e-commerce, established retail giants are duking it out as competition plays out, which will affect what consumers will find on shelves — and in the long run, where they will buy their mobile- and tablet-based entertainment.

The biggest battle is between big box giant Wal-Mart and e-retail king Amazon. Last month, Wal-Mart announced it would stop carrying Amazon’s Kindle devices, which have become hugely-popular with consumers.

The move seems counterintuitive for a shopping giant that aims to be a one-stop destination for a broad swath of customers. But Wal-Mart’s strategy aims to protect its long-run interests against a growing competitor in Amazon, whose Kindle devices aren’t just content readers, but conduits to online shopping — shopping that can further disrupt Wal-Mart’s advantages.

Amazon CEO Jeff Bezos said, “We want to make money because people use our devices, not when they buy our devices.” His strategy is simple: the Kindle’s potent value is its potential to become a conduit to Amazon shopping — a place to read books, movies, and browse the Internet, but also where shopping decisions about those items are made — and most importantly, executed, ideally through its shopping site.

For its part, Wal-Mart characterized its move as a “business decision,” and will continue to sell tablets and e-readers from other manufacturers, including Apple’s iPad, according to Reuters. In the future, retailers like Wal-Mart may be making more decisions like these, in order to preserve their futures as e-commerce evolves.

E-Commerce Wars Are Just Beginning

This latest flap demonstrates how in the mobile space, the country’s biggest retailer is the underdog and Amazon is sitting pretty, at least for now. According to ComScore, Amazon’s family of sites is the top retail destination among smartphone users by a wide margin, drawing nearly 50 million visitors in July. Wal-Mart trailed behind Amazon, as well as Apple and eBay, with just over 16 million visitors.

The Wal-Mart ban on the Kindle won’t affect Amazon much, but it does underscore the reality that traditional competition is keeping an eye on Amazon, demonstrating how brick-and-mortar measurements don’t apply in the online retail space, where it seems every month, new players are emerging to try to grab a slice of the pie.

The transformation of e-commerce affects both online retailers and consumers as both groups pivot to adapt to and embrace the changes. When the holiday shopping season arrives, and stores and websites will give an interesting glimpse of the looming e-commerce wars, played behind the deals and hinting at shopping and payment trends to come. Santa Claus’s reindeer and sleigh have given way to the UPS man and his familiar brown truck, but in the future the king gift-giver may very well be Jeff Bezos or Mark Zuckerberg, with mobile phone in hand.

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