Amazon, Walmart and the cost of low prices


Amazon boxes and a Walmart sign with some dollar signs.
Amazon and Walmart are in a race to make everything cheaper, faster, and ... worse. | Paige Vickers/Vox; Getty Images

Amazon and Walmart are a little bit evil and make us a little bit evil, too.

It’s Amazon’s world, and we’re just living in it. Or Walmart’s. Or really, actually, both.

Many Americans like to think of themselves as conscientious consumers — as the types of people who shop their values, support small businesses, and generally try to do the right thing when they buy. We also all live in reality, where people are busy, our funds are limited, and convenience is really nice. Many of us know that buying shampoo at the local pharmacy would be the better option, but it’s 20 minutes away, and what if, once we get there, it’s locked up? So we place an order on Amazon and move on. We’re well aware we could go to any number of stores for a new bath mat and holiday decorations and back-to-school gear, but we also know we get them all at Walmart for less. We appreciate that; we just don’t appreciate thinking about how little they pay their employees.

Amazon and Walmart are fixtures of commerce in the United States today, retail behemoths that have a stronghold on what consumers buy, online and off. We have played a key role in helping them get there, often neglecting to weigh the trade-offs we make when we resort to them when we shop.

The two companies are fierce competitors, and the competition between them has led to a race to the bottom on pricing, speed, and ruthlessness in an effort for one to come out on top. Their rivalry — and its implications — is the topic of the recently released Winner Sells All: Amazon, Walmart, and the Battle for Our Wallets by veteran business reporter (and my former Vox colleague) Jason Del Rey.

I recently spoke with Del Rey about the grip Amazon and Walmart have on the American economy, the trade-offs they (and, ultimately, we) make for them to run their businesses, and what, if anything, poses a threat to these companies. We also got into how Amazon has managed to take over from Walmart as the Bad Guy in retail — even though nobody’s really a hero here.

This conversation has been edited for length and clarity.

How much of a hold do Amazon and Walmart have on us, as consumers? Like, are there any legitimate competitors?

They have a huge hold on us. What Amazon has done over the years with Prime is a profound change that, by now, goes overlooked. It makes it so a lot of us feel like we can order one product at a time from this magic screen, and that it’s sustainable for business in this country and for the world that it will arrive that day or tomorrow. And that’s the way shopping is today. The effect of Amazon Prime on shopping habits just can’t be overstated enough.

What Walmart’s done, and they’re not the only ones, is they’ve drilled home the idea that what we should value above all else is the lowest possible cost for a good. There are plenty of reasons why tens of millions of people base their shopping on that — they have no choice. But my fear is just within the rivalry that there’s a constant race to the bottom that might be good for each of us in the short term, but long-term poses a whole slew of problems.

It feels to me that part of the story is that these two companies have sort of out-terribled each other over the years to try to compete, constantly undercutting one another and competitors to be faster and cheaper. Do you think that’s a fair assessment?

Listen, I can understand how that can be the view, and there are many times in my reporting history on them that that’s how I felt. If I take a step back, I look at it with a little more nuance.

They have each had, at different times and to different levels, negative impacts on small businesses and working-class people in this country, and they deserve to continue to have scrutiny placed on them for that. It may very well take government intervention to quote-unquote “fix” some of those issues. Putting that aside, it’s hard for me to look at events like the pandemic and the role each of them played in different ways in helping large masses of people get by on a day-to-day basis and think it’s all bad.

Now, why were they in that position to be almost utilities in the first place? A lot of competition has gone away over the years. Is that government’s fault? Do we wish there were better people leading these companies that took a different path? There are a bunch of different answers.

They have played the role of doing what this country has rewarded big corporations for doing in the last few decades, and that’s showing growth at all costs. Everything else is an afterthought.

Is it possible to compete with Amazon and Walmart in the current landscape?

If you’re going head-on at them in industries or categories that are core to their business, it has been very difficult to compete with them at scale. You can carve off customers on the fringes, but if you’re talking about building a multibillion-dollar business doing something that they do well or they care about, it has been next to impossible. There are a few exceptions. I think about Chewy in the pet product category. I don’t know what Chewy’s market cap is today, but it’s a considerable-sized business that has found success.

In decades past, if you went head-to-head, Amazon and Walmart were going to eventually crush you or buy you.

So really, really hard to try to compete, even with possible antitrust action from government regulators swirling around them?

In the future, I think a lot of it will depend on whether there is some type of government intervention. I’m mainly talking about Amazon here, because the days of Walmart being at risk of any antitrust scrutiny feel like they’re gone — much to the frustration of Amazon leadership.

They have both failed a decent amount when it comes to them trying to enter a new space that has successful incumbents.

Like what?

Health care is one space they’ve both had challenges in. Amazon’s trying to buy their way in with their acquisition of One Medical [a primary care provider].

Amazon’s physical retail initiatives, including buying Whole Foods, have largely been, for them, huge disappointments. When I talk to former Amazonians, as they call themselves, they think of themselves as technologists. They just get bored as hell working on physical retail, and I think that showed.

So maybe you can compete with them in things that they’re bad at, or at something else in the future we don’t see yet.

You can look at the apparel and accessories space, companies like Shein and Temu; those companies are growing very quickly and have extremely low prices. I’m sure Amazon’s paying attention as they once did with Wish.com, but I’m skeptical about the long-term sustainability of those businesses and those models.

I hope there’s a company that doesn’t exist today or isn’t getting attention, and in 10, 20 years from now, we are talking about them in this space. Walmart and Amazon are just so entrenched, especially in their combined size in online retail. Even with the slowdown in the last year or two, it’s hard to see real threats to them — unless it’s a company coming from a different angle, maybe a Shopify in software or a TikTok.

Walmart was the original Big Bad in terms of taking out competitors, killing off local retailers, underpaying workers, etc. And then Amazon came along and their positions kind of shifted, at least reputationally. What’s changed?

In the early 2000s, Walmart leadership, including their CEO, essentially made nice with some of their biggest critics — on the environmental front, with critical journalists. It was self-serving, yes, but they went out and took the time to actually meet with and listen to critics, and I think that actually worked for them. Whether that was them really changing their business for moral or good reasons at the time, undertaking some environmental or green initiatives, or whether it was all about PR, it kind of worked.

Amazon has never accepted or had the self-awareness of “maybe these people who say bad things about us have a point.” Folks who have been at the company in recent years talk about this extreme lack of self-awareness that they’re not just a startup out to do good anymore and that when they make decisions, whether it’s labor decisions or partner decisions with the small businesses that sell on their marketplace, these tiny tweaks have massive impacts. All the way up to the top of the company, they have a hard time accepting criticism. They are largely thin-skinned and think they’re misunderstood. It definitely has an effect in Washington, DC, and it makes a lot of critics dig in their heels.

So Amazon’s just kind of bad at the PR part at this point?

Amazon is Walmart 2.0 or 3.0. Walmart, on the fringes, has made some changes to better satisfy some critics, but at their core, there’s a lot of similar, justified criticisms of them that Amazon mostly takes the brunt of.

One big difference, as smart Amazon critics lay out, is Amazon is doing so much in so many different ways across the internet, essentially laying the pipes and then putting up the tollbooth so that their power feels much more dangerous and harder to break. I think that’s why you see in DC and in antitrust circles the infrastructure they’re trying to control from AWS [Amazon Web Services, their cloud computing service] to the advertising platform to all the other fees they charge to their partners. It makes them seem like a different type of danger to competition.

Having Jeff Bezos as the world’s richest man for a long time only hurt them as well, which is ironic when you consider what the Walton family’s combined wealth is.

I wouldn’t understate or undersell how much Jeff Bezos putting himself into the media over the last three or four years has hurt the company in that it has brought more overall attention to him and his wealth.

I’m sure [Amazon CEO] Andy Jassy would love to sit down with you and make the case that Walmart should get a lot more scrutiny. But it does feel, despite their longstanding union beliefs, like they’ve escaped their darkest days of criticisms. I wouldn’t say they’re beloved, but they’re not viewed as poorly as Amazon is in some circles.

Right. Walmart is no longer the boogeyman.

One more thing: There are a lot of people who have issues with Amazon, but I’m no longer surprised how many people do love the company, or love the service. I don’t know if your readers do, or I think a lot of them won’t admit it, but they do.

Well, that’s always the thing. You see the media and certain critics saying everybody hates Big Tech, Amazon’s evil. And then you look at brand favorability, and Amazon is one of the most popular brands in the country. It’s a good service.

I think it’s gotten worse, but yeah.

How do you think about some of the trade-offs both of these companies make — and have consumers make — in order to get people stuff fast and at super-low prices? What does that mean for how they pay and treat their employees so consumers can have low-priced convenience?

There are some really shitty trade-offs. I used to think each of us is to blame for those trade-offs, and I kind of feel that way sometimes, but there are all these reasons why these companies were allowed to become as entrenched and as hard to compete with as they are. Is it the average person’s fault, day to day, doing what they think is the most convenient thing for their lives?

In our house, we are customers of Amazon, of Walmart, of Target and Trader Joe’s and the local coffee shops and restaurants. On a personal level, we try to think about whether we actually need that thing the next day or two days later. Sometimes, it feels like yes, and we’ll still place that order with that service. We’ve gotten better about taking other paths when we don’t. But these companies have convinced us that we need everything within one or two days.

Jet.com, an e-commerce company that briefly existed as an independent company [before being acquired by Walmart], had this idea that they would kick you back some savings if you waited a little longer. That would take some costs out of the logistics part of the business, and oh, by the way, maybe that’s a little better for employees and the environment, too. I wanted to believe all of that could work because it seemed the direction we were heading was a really bad one for everyone except the executives, but that model ended up not working for a variety of reasons.

I’m hopeful there’s a world where we can turn back the clock, but I think a lot of people are addicted to convenience and have convinced themselves it saves time that they use in better ways. Instead, we’re fucking scrolling TikTok.

We’re headed in a direction where there’s absolutely more automation going into these businesses. Walmart and Amazon will make the argument that workers are not going away, we are making their lives and work better and taking away the worst work. But there are also really negative consequences when you add automation to the work, such as quotas for workers being increased.

I’m really hoping there are entrepreneurs out there who can somehow convince us that we don’t need things the same day or the next day, or there’s a sustainable business model to really make a go at a new type of service. It may be just too late, which is dark and depressing.

Once these companies offer one-day shipping or two-day shipping or whatever, doesn’t everybody else have to in order to even try to compete or keep up?

The ripple effects of everyone else following them are real. For someone to choose a different path or a different way, it has to be a very, very young company that is sort of naive and has nothing to lose because they only have three employees. That seems, to me, to be just about it.

What you do with Amazon is actually not shopping; it’s buying. Largely, it’s a very transactional relationship that people have with it. Every so often, there’s an Amazon dress or Amazon whatever, but usually, you’re being sent to the site for some very specific reason. You’re transacting, you’re fulfilling some desire or need. But the idea that you’re browsing or enjoying yourself or window shopping or getting some kind of entertainment value is something they’ve been terrible at. And they’ve tried for years. They’re best at selling stuff that lends itself to transactions and not shopping.

Is there a competitor that upends them by taking the shopping approach? I don’t know. When the stuff we buy most frequently, like groceries or consumer goods or clothing basics, is stuff you don’t need to do much browsing to feel good about your buying decision.

I’ve never thought about it, but it does feel like every time it’s the holiday season I wind up on Amazon looking for stuff to buy and within two minutes am like okay, this is pointless, I can’t do anything, and log off.

The site is not a fun one to move around on, and it doesn’t look all that different from 15 years ago, but they still feel so entrenched that it’s reflex or comfort just to turn to them.

If we think that Amazon and Walmart do have too much control, what’s the biggest threat to them? Unions? Government regulation? Is there a threat at all?

On the Amazon side, they are at this inflection point with layoffs and cost-cutting and a pullback in some areas where they were heavily investing, such as Alexa. Morale is not good there. It feels, in some corners, like a boring, mature company. One big risk to them is bigness and moving slower than they have in their early years, when really their biggest advantage was speed. They were able to roll stuff out and test it for a variety of reasons. Wall Street gave them a long leash, so they didn’t have to worry about profitability. Their bigness is a threat.

On unionization, I’m more skeptical today than I was a year ago that there’s a real, sustainable drive that’s going to make a difference in working conditions there. Maybe if the Teamsters make up more ground than they have to date, they could make a difference, but I’m skeptical of that.

I, like a lot of people, am waiting for this long-rumored FTC antitrust lawsuit to drop [separate from the Prime cancellation lawsuit that the Federal Trade Commission recently filed], and that could have an impact. But it also could be a five- to seven-year process. How much ground they gain in five to seven years as a technology company of their size, I don’t know; it in some ways seems like a hopeless fight. I look at Amazon and think the biggest threat to themselves today really is themselves.

With Walmart, it has taken so much effort and time for them to get to a place where their online services are not awful. They are more committed than they have ever been to try to meet shoppers where they want to be met, when they want to be met, with the products they want to buy, but man, it’s taken a long time and a lot of money. The CEO told me it’s gotten better, but he’s still dissatisfied.

There was a time where Amazon was a real existential threat to Walmart because of how much Walmart was ignoring them, but now it just feels like perhaps they’ll stay in this position of a much smaller number two in e-commerce and kind of be content with that.

Walmart stores, especially as they try to convert them, finally, into mini warehouses and robot headquarters, are not going away. That’s still where so much of their business is done that they’re going to do okay for themselves for a while.

So, for now, we’re just stuck with Amazon and Walmart and being a little complicit in the meantime?

These are complicated companies with complicated impacts. I’d love to say there’s a world where someone upends them because they are big and bad and do a lot of harmful things to partners and employees, but I’ve accepted that they’re not going anywhere and we’ve got to make do with them and then hope on the fringes competitors can gnaw away. Maybe, if they are in fact breaking the law, they can be forced to change the way they do business, but I’m not holding out much hope on any of that.

We live in a world that’s constantly trying to sucker us and trick us, where we’re always surrounded by scams big and small. It can feel impossible to navigate. Every two weeks, join Emily Stewart to look at all the little ways our economic systems control and manipulate the average person. Welcome to The Big Squeeze.

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Have ideas for a future column or thoughts on this one? Email [email protected].

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By: Emily Stewart
Title: Amazon, Walmart, and the price we pay for low prices
Sourced From: www.vox.com/money/23771693/amazon-walmart-ecommerce-shopping-antitrust-jason-del-rey
Published Date: Thu, 29 Jun 2023 12:50:00 +0000

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