This is the billion dollar question that Walmart is attempting to answer with the launch of Walmart+.

I’m a huge fan of the thinking of Silicon Valley investor Peter Thiel. This is a guy known as the Don of the Paypal Mafia (where he worked with and hired Elon Musk, Steve Chen (Founder, Youtube), Reid Hoffman (Founder, LinkedIn) etc).  Thiel often talks about the two types of innovation available to any company - ‘globalisation’ and ‘0 to 1’ (which funnily enough is the name of his book based on his Stanford lectures). 

Now these two forms of innovation arguably distinguish Amazon from Walmart. Amazon I would say is a proponent of Zero to One thinking…and Walmart of Globalisation. Before I go further I need to state that both have their benefits and almost live to serve one another.

Ok, let’s start with Globalisation. 

Globalisation aka. Best in Class

Globalisation is the conceptual idea that we take an innovation (think product, service etc) already available and copy it, imitate it or replicate it. It’s at play anytime we back down from a new idea in favour of something we’ve seen work before (hint - anytime you hear ’show me best in class’ Globalisation is at play). Arguably the Australian retail industry has benefited enormously from Globalisation, from buying merchandise overseas to then be copied and manufactured under a new brand, all the way to store design. I can’t get over how each time I walk into a Coles or Woolies they look more and more like Wholefoods with every refresh. For a lot of what we deem ‘innovation’ it’s more globalisation than anything else. Globalisation is definitely favoured by the ‘traditional retail world’ - I include Walmart in this. It’s a business that has grown by expanding store networks, expanding into new categories, and expanding into new countries. In recent years it has moved heavily into digital and chosen to buy up innovation - Jet.com, Bonobos, Art.com, Flipcart (JV), Wim Yogurt, Parcel or any one of the other 17 other acquisitions they’ve made - in favour of creating it.

In truth, Walmart knows what it’s good at, which is scaling its business and replicating others success. Which brings me to ‘Zero to One’ innovation. 

Zero to One aka. Putting it on the line

Zero to One innovation is in essence creating something that hasn’t existed before. In fact I’ll be more precise with that statement, it’s more often combining ideas to create something new. Amazon in essence took Netflix (subscription TV) and combined it with shipping to create Amazon Prime. It fundamentally redefined retail as it did this. Now everyone is chasing subscription models (through their globalised approach). The benefit of Zero to One innovation is, to quote Thiel:

‘When you create something new, you’re not in competition with anyone - you’re offering the world a product that does not exist’.

This is an approach that Silicon Valley and the start-up world is founded on (as is emerging ‘new retail’). Competition, you might ask, isn’t that a good thing. The short (and controversial) answer No. The more competition there is in a category the less capital there is available. Simple. Just look at the fashion world at the moment, there is way too much competition and a shrinking market. Entering that market at the moment with a globalised model would, in essence, be instant failure. 

N.B - We’re often taught to believe also that competition is good as it keeps businesses honest. I disagree, you can be unethical as a monopoly (Facebook) or in competition (Bohoo fashion, H&M, Zara etc).

Now what I’ve noticed is that we tend to favour the seeming safety of globalisation. The warmth in knowing someone else has done it before us. This type of warmth is totally imaginary, in fact it’s a warmth that should be the opposite of comforting. To quote Thiel again

'We get trapped in competitive cycles for a psychological reason we find it easy to be in crowds and to be doing what lots of other people are doing. There’s something about human behaviour that’s lemming like'. 

Amazon Prime + Globalisation = Walmart+ ?

Which brings me to Walmart’s latest announcement ‘Walmart+’. Now this is a classic globalisation play. Maybe it’s just me but I keep hearing Disney+ when I hear this name (arguably another Globalisation play based on the original Netflix model). Walmart+ will cost US$98 a year (Amazon is US$119) and offer ‘fast home delivery and other perks’…yet to be named. (They’re going to have to be pretty amazing to compete - there are rumours these will be connected to the recent alliance with Shopify). So on the surface the only real difference is price. You could argue that this move may commoditise Amazon Prime, but unless Walmart are going to invest $5-6B in original content, Amazon still has something going for it. 

But what if this is a defensive play?

That said, if we break it down the reason for the creation of Walmart+ we might get a better understanding of it’s true intention. I’ve been thinking a bit about this - now if I were Walmart, and I created Walmart+ it wouldn’t be as an acquisition or offensive play - which is exactly what Amazon Prime is. (You’ll note this is a business obsessed with subscribers and the basis of their shift into physical retail was to gain more customers on Prime). Rather I would use it as a means to keep current customers and ensure they didn’t defect to Amazon. I would also use it as a defensive play to hit Amazon right where it hurts - grocery. The one area Walmart knows a lot about is the logistics of fresh food; the one area Amazon seems to struggle. So what I’m trying to say is maybe this move to copy Amazon is in a strange way genius, only the future will tell.