Wednesday, May 17, 2017

(The Big Disrupt) Amazon: Why Walmart are going to lose to Amazon

There are many reasons why Walmart will lose to Amazon but the only reason that matters is that Walmart cannot compete beat never mind beat Amazon's wildly successful Amazon Prime service. 

Walmart has tried to compete with Amazon prime service most notably with it shipping Pass service that offered 2 day shipping for $50, nearly half the price of a prime subscription fee, only to fall flat on their face and do away with Shipping Pass just seven months later. 

What's concerning isn't that Walmart tried compete with Amazon prime membership program and failed miserably but that the company doesn't seem aware of why Amazon Prime is so successful. Everybody knew that Shipping Pass was dead on arrival because it was competing with amazon prime on price alone ignoring the fact amazon prime attracts and, most importantly, keeps customers loyal to amazon by offering other services that come with prime membership such as amazon prime video at a price. 

Prime is why Amazon can enter other markets and can turn them upside down or at the very least be competitive  

For Walmart to even come close to competing with amazon prime, Walmart would have to make sizeable investments in content along with the costs of providing 2 day free shipping which Walmart clearly aren't prepared to do and rightly so. Why Walmart is even attempting to take on Amazon at its own game is makes no sense as its main advantage over Amazon lies in its stores. Walmart can take a bite out of amazon the moment it figures out it's click and collect operation which would put pressure on Amazon to ramp up its plan to build checkout free stores, a business Amazon have yet to master with various media reports . 

Walmart even trying to compete reads to me like a very stupid idea and Walmart is going to pay for it.       

No company is loved by everybody and despite providing low prices and mass employment for many Americans, Walmart are one of the most hated companies in modern America. Almost all companies that dominate their market are hated but everyone seems to have a special place in their hearts when it comes Walmart as Walmart has come to represent everything people don't like about big business. 

While you might wonder why a company so hated is the first port of call for grocery purchases in the US, the answer is quite simple: price. Walmart from the outset has set its stall on providing the lowest prices and has mostly come good on its promise but in an age where Amazon and German discounter Aldi can match or beat Walmart rock bottom prices, Walmart are experiencing pressure on all fronts. 

Walmart, fully aware they can no longer compete purely on price, have realised that they must work on building customer loyalty but with the company often coming dead last among its competitors in customer satisfaction surveys and its aisles and parking lots becoming venues for fights, meth labs and old fashioned murder on an almost weekly basis, saying Walmart has its work cut out is an understatement to say the least. 

However that said, Walmart aren't the world biggest retailer for nothing lack of and with the right strategy can give Amazon a real run for its money but looking at the public statements offered by its management, its insistence to compete on price despite increasingly losing to competitors on it sole brand promises, and it's concerning lack of ability to keep customers, Walmart look like a company that's fighting a battle it knows it's going to lose.  

Saturday, May 6, 2017

(TV) Pay TV: The Pay TV apocalypse continues

It's no secret that we're the golden age of television but its also no state secret that cable and satellite Pay TV providers have been taking a pounding for years which has culminated this week with the worst quarter in the history of the industry with Pay TV providers losing a whopping 762,00 subscribers. 

Why Pay TV providers are losing subscribers at a record rate isn't rocket science with the combination of skyrocketing price hikes, an increasingly unpopular business model, and better digital alternatives offering by SVOD services such as Netflix, Amazon and Hulu, it was only a matter of time before quarters like this become the new normal.

What's worse is that Pay TV providers are in no position to do much about it as they contend with soaring programming costs largely fuelled by the increasing value of sports content. Pay TV providers have for years passed  this cost onto customers without much to sweeten the deal which has seen an customer cut their cords at record rates for the best part of  a decade.  

It's always concerning when an industry can't keep its customers and even more so when can't attract new ones but the pay TV industry recent bloodletting has shown that can't do either which is why an already mature market is now showing signs of atrophy.

The decision to pay lengthy and expensive premiums for sports TV rights has cost Pay TV providers dearly but rationale behind pay TV's bet on live sport made sense as live sport events such as the Super Bowl or march madness have proved to be the most reliable content for getting bums on sofas across the land at the same time but as the last NFL regular season proved, sports content is showing signs of losing its lustre. The 7% dip in regular season viewing and a drop in Super Bowl viewership for the second year running saw many executives clamouring for answers to why NFL ratings dropped from a highly divisive presidential edition to Colin Kaepernick's stance (or lack thereof) during the national anthem. 

However, despite the complicated and varying factors that negatively affected NFL viewership during both regular and postseason games, the fact remains that pay TV's costly bet on sports programming is starting to unravel and it's unclear whether last year was a blip or a start of a very grave trend.  

Despite their recent struggles, Pay TV providers aren't sitting on their hands and idly watching their industry crumble before their eyes with  pay TV operators increasing their digital footprint with skinny bundles and even SVOD offerings that appeal to cord cutters and cord nevers who enjoy the power of watching TV where, how, and when they want to. 

However, Pay TV providers fight in keeping and attracting new customers is taking a turn for the worse with Amazon and Facebook picking up live sports content deals. This development should scare the life out of pay TV executives everywhere as While Amazon's deal in particular involves the ecommerce giant airing much maligned Thursday night games, should Amazon attract large audiences for Thursday night NFL matchups or at least larger viewership number than their cable counterparts. It could see live sport content providers hosting more of their content with online partners. 

This would be a disaster for Pay TV providers and networks as they'll have to outspend deep pocketed behemoths for live sports content when the cost for live sports TV rights are already high. Pay TV providers will be forced to pass even more costs onto a customer base already looking for a reason to jump ship.  

However, what should keep pay TV executives up at night is that whether Amazon or Facebook attract large audiences for NFL or MLS games or not is what they'll learn about sports viewers. The reason why both Facebook and Amazon have largely pulled away from their direct competitors and send shivers down the spine of executives everywhere when they so much as hint about entering their market is because both companies are become very good at using data from their users to provide a more personalized service to the point they know their customers better inside out, literally. 

It's why both companies have abnormally high customer retention rates and never have trouble attracting new users as their ability to implicitly meet the needs of their users through data keeps current users hooked with new features and services which in turn provides Amazon and Facebook new opportunities to learn even more about their users habits. 

What all this means is should Amazon and Facebook deliver impressive viewership numbers, Pay TV will have a hard time getting those customers back. This alone will put a steak through the hearts of Pay TV providers everywhere who will continue to lose customers, spend and lose millions trying to get them back and surrender their future customer base to SVOD services. 

In sum, there has been much talk about the future of Television but now the chatter should cease as the future is here and it's going to be brutal.


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