Slow Motion Starvation A first glance Walmart with its $418B worldwide 2017 revenues and 5,000 Walmart stores might lead one to assume it is well positioned for the war. Dig a little deeper and we find Walmart’s growth rate was a miserly .63% while Amazon posted a whooping increase in 25.2% sales growth in 2016 and 44.6% in 2017. Amazon with its 105 million Prime members offers a 5% discount for shopping in its 470 Whole Foods Stores. Think about it. Amazon’s Whole Food stores require ZERO advertising expenditure while Walmart spends nearly $3B per year on advertising each year.
Local Businesses are starving to death
- Amazon sells branded over-the-counter medications such as Advil, Mucinex and Nicorette as well as options from Perrigo’s generic GoodSense brand.
- Basic Care, Amazon’s recently launched exclusive line of Perrigo OTC health products, is a direct challenge to pharmacy retail chains.
- CVS Health, Walgreens Boots Alliance and Rite Aid are losing in-store traffic as people shop for OTC products online. Where they shop is Amazon.
In LaVito’s article the most telling revelation is that people are increasingly shopping for OTC products online. Fortune Magazine reported, “For the first time ever, shoppers are going to the web for most of their purchases. An annual survey by analytics firm comScore (scor, -0.92%) and UPS (ups, +1.11%) found that consumers are now buying more things online than in stores.
The survey, now in its fifth year, polled more than 5,000 consumers who make at least two online purchases in a three-month period. According to results, shoppers now make 51% of their purchases online, compared to 48% in 2015 and 47% in 2014.” The shift to online shopping
Amazon is where 55%+ of online shoppers begin. LaVito goes on, “Pharmacies make money when people walk in looking to grab medicine and end up buying cosmetics and other goods. They’re already losing traffic as people shop for those products online, including on Amazon. Giving them another possible reason to skip the store could hurt even more.
Matthew Oster, head of consumer health research at global market research firm Euromonitor, knows what’s coming, “It’s a very different world, and having Amazon jump in is not a good sign for existing brands, either branded or private label, because the way Amazon works is its ability to take on unprofitable ventures for a time to see how things go. And the fact they have a near monopoly in e-commerce gives them a lot of scale that can allow them to undercut price. So that aspect should be concerning for whoever their competitors are in that space.”
CVS, Rite Aid, Acme, Kroger, Safeway, Publix, and other large national and regional chains will fight back. But like France against the German blitzkrieg, don’t expect the outcome to be positive. The most immediate casualties will be local pharmacies, grocery stores, butcher shops, and other local businesses don’t stand a chance. As these local business fall, local media collapses.