Wal-Mart Stores (NYSE:WMT) and Amazon.com (NASDAQ:AMZN) are known as bitter rivals, but they are also the companies most likely to shape the retail landscape over the next 10 or 20 years. Though they are often mentioned in the same breath, the two companies are generally thought of as very different businesses.
Wal-Mart, the traditional bricks-and-mortar retailer, has come to dominate the industry via giant superstores, ruthless expansion, and unbeatable economies of scale. It has squeezed nearly every stakeholder- -- employees, suppliers, governments, etc. -- to deliver the lowest prices possible to customers. However, as recent comparable-store sales results show, the model is no longer a guarantee of sustainable growth, in large part due to the rise of e-commerce.
Meanwhile, Amazon, the great disruptor and e-commerce leader, is seen as the champion of the future, a company sacrificing profits today to invest in new technologies and build competitive advantages that will last for generations. Amazon has not only found a way to sometimes beat Wal-Mart on price, but it often does so with best-in-class customer service.
Despite their differences, Wal-Mart and Amazon have more in common than the casual observer might think. In fact, the philosophies of their respective founders, Sam Walton and Jeff Bezos, are surprisingly similar: obsessing over delivering low prices, putting the customer first, and managing for the long term.
Below are several quotes from the two leaders. Guess who said what and scroll down for the answers:
1. "There is only one boss -- the customer. And he can fire everybody in the company from the chairman on down, simply by spending his money somewhere else."
2. "If you're truly obsessed about your customers, it will cover a lot of your other mistakes."
3. "I have always been driven to buck the system, to innovate, to take things beyond where they've been."
4. "You have to be willing to be misunderstood if you're going to innovate."
On Wall Street
5. "We will continue to make investment decisions based in light of long-term market leadership considerations rather than short-term profitability considerations or short-term Wall Street reactions."
6. "We couldn't care less about what is forecast or what the market says we ought to do."
7. "If you only do things where your company knows the answer in advance, you go away."
8. "What we guard against around here is people saying, 'Let's think about it.' We make a decision. Then we act on it."
9. "By cutting your price, you can boost your sales to a point where you earn far more at the cheaper retail price than you would have by selling the item at the higher price. In retailer language, you can lower your markup but earn more because of the increased volume."
10. "Percentage margins don't matter. What matters always is dollar margins: the actual dollar amount. Companies are valued not on their percentage margins, but on how many dollars they actually make, and a multiple of that."
Though the two men lived very different lives -- Walton was a son of the Depression-era heartland who maintained his thriftiness even as a billionaire, while Bezos graduated from Princeton and worked on Wall Street before launching Amazon -- their philosophies are very similar. For both, success came from putting the customer first, making prices as low as possible, and innovating in spite of the groans of Wall Street and other critics.
One takeaway is that in business the path to success might be simpler than often assumed. Focusing on a few key strengths such as pleasing the customer and offering low prices could be the surest way to industry leadership, at least in retail. Both Amazon and Wal-Mart made early investors rich many times over, but the stocks' heady growth days are likely over with each worth more than $200 billion. The trick for investors then might be to spot the next Bezos or Walton before the market catches on.
Walton: 1, 3, 6, 8, 9.
Bezos: 2, 4, 5, 7, 10.