How to Compete – Amazon Acquisition of Whole Foods Prompts Walmart Threats to Partners


UNDERSTANDING COMPETITION

Our free market is based on the concept of competition. But there seem to be two very different ways of looking at that word…

  1. Google’s definition says “strive to gain or win something by defeating or establishing superiority over others who are trying to do the same.”
  2. Just below that definition, it shows that the Latin origin of the word comes from “com” and “petere.” The latter is to “aim at, seek,” which seems in line with our current definition.

“Com” means together, but this part of the word is mostly misunderstood or ignored, and this is because we have been trained to live in a world of scarcity. If there is only so much money, food, power, shelter, etc… out there, then we have to win and someone else has to lose.

If, on the other hand, there is enough of everything to go around, then we can come together to seek something greater. With an abundance, or win-win mentality, we can accomplish more than me can alone.

Why do the Judo masters above bow to each other? Each respects the other and values what the other brings out in him… a better person.


RESPONDING TO COMPETITION

Amazon and Walmart demonstrated these two mindsets recently. Amazon acquired Whole Foods for $13.7B, and analysts saw the competitive advantage: In addition to some customer crossover and some customer acquisition, there are huge benefits to both businesses, the main ones being…

  1. Amazon Fresh, the grocery business line, was considered viable only in cities that were dense enough to create a volume threshold that would be profitable. Whole Foods will give Amazon a physical foothold in many neighborhoods to increase this grocery business, and it will give them the brand and infrastructure to expand it.
  2. Whole Foods existing and future markets will benefit from the technology infrastructure that is Amazon, not to mention its incredible online presence and reach.

Amazon seems one step closer to taking over the world… Regardless of how you feel about this, we have to credit the apparent win-win move.

How did Walmart respond to this move? It told certain partners that it would no longer do business with them if they used Amazon’s cloud services. They would have to move, which is no small feat for most companies.

This is a bully’s threat.

Walmart is afraid of Amazon, so instead of seeking similar strategic partnerships that would strengthen its business, it issues threats in hopes of damaging Amazon’s business that will likely just drive business away.

Once upon a time, Walmart could have gotten away with this (and it probably will work to to some degree), because it was a big enough bully that no one could survive without it. Now, though… Amazon and others are creating alternatives to this win-lose mindset.


HOW WILL YOU COMPETE?

Personally, I hate to see this behavior from Walmart, especially because it used to be such an amazing company. It pioneered large-scale cost-pricing and many other retail norms that we know today.

For any of you that hate Walmart, you should know that Jeff Bezos, founder of Amazon, is known to have carried Sam Walton’s autobiography, Made in America, all over for many years, because he was learning from the best. I’m a huge fan of that book and did a post on it here.

If anything, this is just evidence that things change, and the more they change, the more they stay the same. Walmart was an icon for success and beat out other big retailers like K-Mart and Target. Amazon now seems to be doing the same to them.

I think this success (which is always temporary on a long enough time-frame) is based on the mindset that the company has and how they choose to compete. Instead of continuing to focus on its customers, which led to the incredible success of Walmart under Sam Walton, it seems to be reacting out of fear in ways that will surely contribute to its continued loss in the market.

How will Amazon choose to compete? Will it continue to be customer-centric and do everything it can to make your life easier and more affordable? When it gets too big, will it start making decisions out of fear? Does it depend on who is managing the company, or more on the market?

More importantly, how will you choose to compete? You can choose to see competition as a challenge that will make you and your competitor (and maybe others) stronger and better, or you can choose to be afraid of the challenge, to avoid, sabotage, or ignore it. One is easier in the short-term. One is the only hope for our long-term.