On Tuesday, Walmart’s value, as reflected in its stock price, dropped by more than 10 percent. That’s nearly $31 billion. It had a bad quarter and in no small part suffered as a result of complications with its online inventory restocking system—it ran out of some items in demand and so couldn’t sell what it didn’t have. But there’s another part to Walmart’s apparent decline. Based on its failure to deliver stronger online sales, speculators rightly question if, in the long run, it can match Amazon.
It’s worth reflecting on how Walmart and Amazon came to compete, and where they were just a decade ago. Walmart stood accused of destroying local markets by buying up entire supply chains and driving smaller firms out of business. In reality, Walmart has had good as well as bad effects. The big-box chain may have wiped out some mom-and-pop franchises, but it has made affordable products available to rural residents who wouldn’t otherwise have access to them, and it has kept prices low for everyone—and not just at Walmart.
The chain’s lower prices, however obtained, attracted lower-income shoppers and enabled them to make improvements to their homes and lives they couldn’t otherwise make. It was quite a job creator, too: By the middle of the last decade, Walmart had became the largest private employer in the United States, now with more than 2.3 million employees. The concern that the Arkansas-based retail giant would demolish all local economies and drive out all other businesses haven’t quite panned out. Some smaller competitors are still finding ways to stay viable, even as Walmart has had to pivot to stay competitive.
Walmart’s model is changing, because it has to. Sensing a shift in customer demand from brick and mortar, which had traditionally been its model, to more of an online marketplace, the retailer purchased JET.com for $3 billion, with stock incentives. But so far the move has failed to bear fruit.
In the past year, by contrast, Amazon’s stock value has risen at three times the pace of Walmart’s and its market capitalization has become more than two and a half times Walmart’s. While Walmart is failing to master online retail, Amazon is buying supermarket chains.
For more than two decades, Walmart has been the object of fear and loathing on the part of left-leaning economists. Indie documentaries like Wal-Mart: The High Cost of Low Price paint a dire picture of the company’s aims and the social effects of its success. We recall, too, the more fanciful fears expressed in movies like Demolition Man, in which one restaurant chain has beat out all its competitors in the “chain wars” and the only place you can eat is Taco Bell. But for all the faults of America’s system of state-managed capitalism—in which mega-corporations use and abuse the power of government to stay on top and in which government officials are happy to play along—we still have an economy that’s sufficiently free to keep one mega-giant from dominating the market for very long.
It’s too early to say, but the multi-billion-dollar retail company we were once told would take over the world doesn’t appear to be succeeding.
