Walmart and Amazon represent two sides of the U.S. economy locked in a bitter feud — brick-and-mortar stores versus online retail. We think of Amazon as the upstart in all of this and Walmart as the stalwart, but there are signs that might be changing.
With the acquisitions Walmart is making, who's the real threat to whom in this retail tussle?
Josh Brown, the CEO of Ritholtz Wealth Management, joined us to talk about both of the companies' strategies and which company could pull ahead. Below is an edited transcript.
Sabri Ben-Achour: So you argue that it's actually Amazon that is the maturing company here while Walmart is on the verge of a breakout for the first time.
Josh Brown: Amazon is starting to look more like a classic incumbent and Walmart is acting in a very aggressive way. They're starting to look like they want to be more of a disruptor. They acquired Jet.com. They paid a couple of billion dollars for it. A lot of people at the time said, "You are buying this online discounting site with very little revenue and obviously no profits and you're paying a lot." But the real question is, can they afford not to? So you saw explosive e-commerce comps, meaning comparisons, this year versus last year. Wall Street is getting excited about what Walmart is doing with technology for the first time in a long time.
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Ben-Achour: Amazon is still, though, a legit disruptor. Can we say that its stock price is high, it's driven shares in brick-and-mortar companies lower?
Brown: Right, but when you've already disrupted everyone and your market cap is equivalent or higher than every other competitor's market cap combined, you're no longer the disruptor. Now you're the 400-pound gorilla and that's not a bad thing. However, there are things that Walmart's doing in-store with the way that they are allowing customers to check themselves out with their own phones, for example. And there are things that Walmart is doing with e-commerce. What's interesting is while they're doing that, Amazon's kind of on this parallel track where they're trying to build up the logistical capability and the brick-and-mortar capability, frankly, that Walmart already possesses.
Ben-Achour: Well, just as you said, Walmart and Amazon each have kind of what the other wants. Amazon has this terrific online sales program, and Walmart has physical ubiquity. Who's the threat to whom?
Brown: You have Amazon buying Whole Foods, which is essentially a chain of 100 some odd brick-and-mortar supermarkets — which is as brutal a business as any business — and they're paying almost $14 billion for it. Walmart already has that brick-and-mortar infrastructure. So anything that Amazon does with Whole Foods, just as an example, Walmart can probably do as well. The old phase where we're thinking about Amazon pulling sales away from Walmart retail stores — we're probably through that period.