05 April 2016
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A month ago, an unprecedented event happened on Wall Street: Amazon exceeded WalMart’s value by USD$15 billion, something which surprised everyone because it is common knowledge that WalMart is the biggest company of its type in the world.
What were the factors behind this unexpected event? Amazon is a company devoted to e-commerce and was founded in 1994. It was also one of the first to begin selling products via the internet. Its beginnings were tough with losses of up to USD$303 million, but it was able to discern how to capitalize and establish itself by expanding its business from only books to electronic items, furniture and other items as well.
In my opinion, one of the main differences between these two companies and the key to Amazon’s rapid growth is its business model as depicted in the following infograph. WalMart offers just 4.2 million products while Amazon offers 250 million. Its market grows day by day.
WalMart has stuck to its traditional business model with stores in just 27 countries and has let innovation in its e-commerce slip by the wayside. This is how Amazon has managed to gain ground and reach 185 countries. From this, we can conclude that customers have begun to shift towards the internet when purchasing all kinds of products.
Proof of this is an article published by Forbes, which states that WalMart has stopped growing exponentially, registering just 1% annual growth since 2011. This clearly shows us that e-commerce is becoming an important part of daily life and companies (both big and small) that do not join this trend are at risk of becoming stagnated.
