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Earlier this week we dissected the similarities and differences between Amazon\u2019s<\/strong> \u201cWhy\u201d approach to innovation and Walmart\u2019s<\/strong> \u201cAnd\u201d attitude. So, which strategy will lead to an ultimate winner in this fierce battle for retail supremacy? Only time will tell, but perhaps no other company needs to be a \u201cWhy\u201d company if Amazon is already filling that role.<\/p>\n If you missed the first part of this series detailing the two companies\u2019 different approaches, check it out here.<\/em><\/p>\n Naysayers might be inclined to point out that sitting back and allowing just one company to push the needle will lead to inevitable gaps in innovation, but Walmart is certainly continuing to innovate in its biggest stronghold \u2014 the store (notably, an area where Amazon has had less success) \u2014 and that doesn\u2019t seem likely to stop.<\/p>\n In just the last year, Walmart has:<\/p>\n The jury\u2019s out on whether Walmart is leading the innovation charge or following in Amazon\u2019s wake in certain areas (retail media and Prime membership are two good examples of the latter). Regardless, digging into the \u201cWhy\u201d questions that Amazon is currently asking gives a very interesting picture of where that company, and perhaps as a result the retail industry writ large, might be headed next.<\/strong><\/p>\n Lucky for us, Amazon CEO Andy Jassy shared some of the \u201cWhy\u201d questions he and his team are turning their attention to now in his annual letter to shareholders. We took a look at those questions and what we know about both retailers\u2019 moves in these spaces so far. \u00a0<\/p>\n This was actually the last question that Jassy shared, but perhaps the most interesting one because in many ways it falls into the realm of things that aren\u2019t traditionally a concern for retailers.<\/p>\n The \u201cmedtail\u201d movement is changing that, with Amazon, Walmart and many other retailers moving heavily into the healthcare space. And while the increasing number of medical-related services that these companies are offering might very well improve the healthcare experience, altruism isn\u2019t the only motivator. Healthcare\u2019s high profit margin is also a big draw. Despite some headwinds in recent years, EBITDA for the U.S. healthcare sector is projected to increase 7%<\/strong> annually to reach $987 billion<\/strong> in 2028, according to McKinsey.<\/p>\n In fact, healthcare\u2019s fiscal appeal led NYU Professor Scott Galloway to predict that Amazon would move into the space back in 2020, well before the company\u2019s- 2022 acquisition of primary care firm One Medical<\/strong>: \u201cBasically every CEO has to be able to convince investors their stock price has a good chance of\u00a0doubling in five<\/strong>\u00a0years,\u201d explained Galloway in a 2020 interview with\u00a0GeekWire<\/em>. \u201cFor Amazon to do that, even if they get operational leverage, they\u2019re running into the law of big numbers, which means they probably have to add somewhere between\u00a0$150 billion<\/strong>\u00a0or\u00a0a quarter of a trillion<\/strong>\u00a0dollars in top-line revenue \u2014\u00a0add that<\/em>\u00a0\u2014 in the next five years. That helps us predict what businesses they are going into.<\/p>\n \u201cNow, what does Amazon do? They come into an industry and they raise trust and satisfaction,\u201d Galloway added. \u201cAnd if you look at the industry where all roads lead to \u2014 high margin, huge industry, lack of consumer satisfaction \u2014 all roads lead to the same place. That\u2019s healthcare.<\/strong>\u201d<\/p>\n Since its acquisition of One Medical, Amazon has been moving full steam ahead into healthcare, including offering the subscription telehealth service as a reduced-price add-on benefit for Prime members, launching a service to help people with chronic conditions access benefits available to them and continually beefing up its pharmacy offerings.<\/p>\n But Walmart isn\u2019t looking to be left behind in the medtail rush, especially since pharmacy has long been part of its core offering. Last year, that company began leasing clinical space in its stores for senior-focused primary care centers, although it has found that actually running medical facilities can be an expensive proposition; also in 2024, the company shut down its 51<\/strong> Walmart Health centers, calling the business \u201cunsustainable.\u201d Instead, Walmart now seems focused on the digital side of the equation, as is Amazon, with enhanced offerings like same-day prescription delivery and streamlined fulfillment via robotics. In fact, just this week the company debuted a new shopping experience for customers on Medicare.\u00a0 \u00a0<\/p>\n Not surprisingly AI will be a key focus of innovation and investment at Amazon, with Jassy answering his own question by predicting that generative AI \u201cis going to reinvent virtually every customer experience we know<\/strong> and enable altogether new ones about which we\u2019ve only fantasized.\u201d<\/strong><\/p>\n He also added a warning for other companies: \u201cIf your customer experiences aren\u2019t planning to leverage these intelligent models, their ability to query giant corpuses of data and quickly find your needle in the haystack, their ability to keep getting smarter with more feedback and data, and their future agentic capabilities, you will not be competitive.\u201d<\/p>\n Amazon wants to be at the bleeding edge of this, which is why the company is already building more than 1,000<\/strong> Gen AI applications that, according to Jassy, are aimed at \u201cmeaningfully changing customer experiences in shopping, coding, personal assistants, streaming video and music, advertising, healthcare, reading and home devices.\u201d\u00a0 And that\u2019s not including the \u201ckey primitives\u201d (or building blocks) for AI development that AWS<\/strong> is working on. Jassy concluded by calling AI \u201ca once-in-a-lifetime reinvention of everything we know.\u201d<\/p>\n Walmart also is moving heavily in this space across all areas of its business, although without an AWS-equivalent division that development at the moment seems to be focused primarily on internal systems and processes. Still, Walmart has recently shown an Amazon-style penchant for renting out tech it\u2019s developed internally to other companies as a white-label service, so there\u2019s a possibility it will eventually do the same with AI applications.<\/p>\n Jassy sees great potential in this realm, and also views Amazon as having a head start with Alexa. But Walmart has been playing in this area for a while as well, with a range of new assistive AI offerings already available on its digital platforms and in stores. We also know there\u2019s plenty more in the works thanks to the accidental reveal of an internal Walmart Teams chat last week at a Microsoft Build talk. \u00a0\u00a0<\/p>\n According to Jassy, the world has not yet reached the moment where gains in delivery speed are not worth the expense and effort. In fact, Jassy said that so far, every time \u201cwe promise faster delivery times, customers complete purchases at a meaningfully higher rate and shop with us more frequently,\u201d and as such he plans to continue to up the ante.<\/strong><\/p>\n This increasing speed of delivery at Amazon will continue to be enabled by the company\u2019s regionalization of its fulfillment network as well as new product \u201cplacement algorithms,\u201d all of which sounds very similar to what Walmart is doing with its supply chain transformation (see Part 1 for more details), albeit in a slightly different order. Walmart\u2019s stores, for example, are already hyper-regionalized, and Walmart U.S. President and CEO John Furner said the company will be able to deliver to 95%<\/strong> of American households within three<\/strong> hours later this year.<\/p>\n This question isn\u2019t a big surprise given that Amazon just announced plans to spend $4 billion<\/strong> to build out its rural delivery network. It is, however, a direct challenge to Walmart, which has historically been the go-to for this consumer set.<\/p>\n Definitely a question that wouldn\u2019t normally fall to a retailer to answer, but this is Amazon, and Jassy said he believes the company\u2019s Project Kuiper \u2014 a low-Earth-orbit satellite internet network, akin to Elon Musk\u2019s Starlink \u2014 while being capital-intensive to launch, will eventually be a \u201cmeaningful ROIC [return on invested capital] business for us.\u201d<\/p>\n Thus far, however, there\u2019s been no indication that this will be one of the \u201cwhy\u2019s\u201d that Walmart chooses to follow.<\/p>\n Regardless of where these two companies head next, one thing is clear, both Walmart and Amazon, are set to continue shaping the retail landscape, as they already have for decades. <\/p>\nWalmart\u2019s First-Mover Advantage Remains in the Store<\/strong><\/h2>\n
Where Amazon is Looking to Innovate Next<\/strong><\/h2>\n
Why does healthcare have to be so stressful?<\/strong><\/h2>\n
Why is AI so important?<\/strong><\/h2>\n
Why haven\u2019t personal assistants taken off yet?<\/strong><\/h2>\n
Why can\u2019t we get items to customers even faster, and does it matter?<\/strong><\/h2>\n
Why can\u2019t people in small towns enjoy the same fast delivery speeds as people in cities?<\/strong><\/h2>\n
Why can\u2019t we help the hundreds of millions of people without broadband connectivity?<\/strong><\/h2>\n