Why some see Walmart as an underdog to Amazon when it comes to e-commerce

Jason Del Rey is a business journalist who spent nine years at Recode, where his beat included covering Amazon and Walmart. He also hosted the podcast Land of the Giants: The Rise of Amazon. His new book, Winner Sells All: Amazon, Walmart, and the Battle for Our Wallets, details the long-running rivalry between the globe’s two biggest retailers. We asked Del Rey about how a company as mammoth as Walmart is perceived by some as an underdog, why Amazon’s Price Check app (remember that?) backfired, and how charging sales tax ended up being a good thing for Amazon.

This is the first of a two-part interview. It has been edited and condensed for clarity.

As you noted in the book, in the ’90s, Walmart was viewed by some as kind of a bogeyman and a small-business killer. But in terms of Amazon today, you say that sometimes Walmart is the underdog. To what degree is Walmart the underdog in that rivalry?

In the digital world of retail, Walmart is absolutely the underdog. Amazon has, in some ways, not learned some of the hard lessons that Walmart has somewhat learned over time, related to being Public Enemy No. 1 among some parts of society: independent businesses and independent business groups, regulators who don’t believe that just because you have cheap prices that means you’re a net good for the economy, environmental groups, and labor activists.

I’ve covered both companies for a decade and I’ve been shocked to the degree that Amazon has mostly this past decade, by and large, dismissed critics without real conversation. And I think that has hurt them both in the public eye and certainly in Washington, DC. In the last few years, I would hear from folks in DC [who] were shocked by the arrogance at which [Amazon] would respond to inquiries from folks in Congress, or other leaders.

So yes, I think in a lot of ways, Amazon is Walmart 2.0 or 3.0 when it comes to being a target of critics across labor, competition, and independent business.

In the book, you write about the Amazon Price Check app that launched in 2010. Remind us what the strategy behind it was and why it may have ended up kind of backfiring.

Price Check was an app that essentially allowed you, the shopper, to scan an item in a physical retail store and immediately be taken to the product page on Amazon and given the details of the pricing and product information on Amazon. The intent inside Amazon was A) to convert some physical shoppers into online shoppers, and B) to get pricing data from the big competitors that Amazon was facing in the physical world.

That’s genius.

It seemed like a shrewd move. How it backfired was…the narrative began that Amazon was trying to further decimate small businesses by stealing their information and their data, when in fact, Amazon’s intent was really to go after the big guys…

Amazon had to sort of end the program with their tail between their legs. And the shrewd or genius move–like we’ve seen happen to Amazon over the years occasionally–backfired.

In Amazon’s earlier days, it avoided collecting sales tax in states where it didn’t have a physical presence, which initially was seen as an unfair advantage for Amazon. Can you talk about, as you described in the book, how avoiding taxes hamstrung Amazon in a way, and once they agreed to collect taxes, they were able to implement a better strategy?

Amazon was so obsessed with not creating what’s called “tax nexus” in states across the country that would force them to collect sales tax from customers and in turn charge sales tax, that they actually held back the expansion of their warehouses…If they didn’t collect it from customers their prices were inherently lower than their brick-and-mortar rivals.

That said, once they started cutting deals with different states and agreeing to start collecting and charging sales tax, their warehouse expansion just kind of went nuts and they had no restraints, and that helped build the flywheel of Amazon Prime and fast delivery, which is now sort of the norm today. But back when the sales tax deals were signed over a decade ago, Prime was still sort of getting its legs under it.—AAN

Retail Brew reached out to Amazon and Walmart for comment. Amazon declined to comment; Walmart did not respond to our requests.

Next time, in Part 2: How Amazon buying Whole Foods changed the game.