Walmart / Amazon: prime time

Walmart may, at last, give Amazon some real competition in online retail. It will offer unlimited shipping for a $50 membership fee, mimicking Amazon's Prime service, which is twice the price - until Amazon plays tit-for-tat, which would be entirely in character.

Initially the Walmart offer will only be available in a few US markets, but if it goes national, Amazon's US retail margins, already under 4 per cent, could come under pressure. Amazon and its investors seem perfectly comfortable with low returns, though.

A trickier question is how much pain Walmart is willing to tolerate. Its US margins are 8 per cent and it mints cash. Competing properly online may well mean sacrificing some of that. Capital investment, as a proportion of sales, at Amazon is more than double Walmart's. It is traditional to fault Amazon for sacrificing profit to growth. Perhaps Walmart should take some heat for sacrificing growth for profit.

Email the Lex team at [email protected]

© The Financial Times Limited 2015. All rights reserved.
FT and Financial Times are trademarks of the Financial Times Ltd.
Not to be redistributed, copied or modified in any way.
Euro2day.gr is solely responsible for providing this translation and the Financial Times Limited does not accept any liability for the accuracy or quality of the translation