Walmart and Amazon are the primary forces in retail right now. They are locked in a pitched battle to see who is going to control the future of retailing. Each approaches retail from a radically different perspective. Walmart is a retailer with most of America walking through its doors each week. Amazon is an e-commerce company with almost half of American households subscribed to its Prime service. But beyond a retail battle, these two companies are indicative of a fundamental shift in the US marketplace—a shift from a Distribution Economy to an Audience Economy.
What Is an Audience Economy?
Historically, growing a brand in the US was all about distribution. You needed your products to be on the shelves or in the locations where people would need them. You also needed your brand to be in the minds of all the consumers who were thinking about your category. You did this by pushing out your products and your messages in as many places as you could.
Coca-Cola is the classic pushmarketer. Their mission was to put a Coke “within an arm’s reach of desire,” and they succeeded. Think about how far away a Coke (or Coke-owned product) is from you right now or how many places you’ve seen their logo. Coke demonstrates Distribution Economy on a global scale better than any company in human history. And yet, even though they’ve succeeded fabulously at this “arm’s reach” distribution goal, the company has struggled recently as the culture has shifted out from beneath them. Sales of core products have begun to flag, and new upstarts have eaten into market share. Coke, the classic Distribution Economy company, is feeling this shift from push to pull.
LaCroix is a poster child for the Audience Economy. With essentially zero advertising, the carbonated beverage has developed an audience of raving fans who are pulling their products into the marketplace with breakneck speed. When I spoke to their head of marketing, he indicated that their approach is to look for audience-generated love (i.e. content) and then to get behind it. Meaning, LaCroix promotes the content their audience produces about their products. They know that creating an audience will create pull, which will lead to distribution.
Other examples of companies who are upending long-standing businesses and models by amassing an audience of their own include Apple, Netflix, Hulu, Dollar Shave Club, Honest Company, Glossier, GoPro, Red Bull, and influencers like Michelle Phan. Each of these companies has amassed a significant audience and use it as their leverage to compete against much larger, incumbent companies who rely on the audiences of others. Having a direct relationship with their audience is the hallmark of these companies. People love these brands. They love the content that these brands create as much as their products because it adds value and delight to their lives.
When you have an audience of your own, that audience pulls your product to them, they pull your content to them, and they pull your brand to them. You don’t have to push. They are looking for you. They are talking about you. They become your distribution channel.
Audience Economy = Pull Retail
Amazon also belongs on this list of Audience Economy companies. All of their strategic moves over the years from Marketplace to Prime to Prime Video to Alexa have been about both growing the size and deepening the engagement with their audience—and, in turn, increasing their pull. If Amazon didn’t have an audience, then we would not be talking about them in the same sentence as Walmart. But if Walmart didn’t have an audience, then they would not be in any position to battle the e-commerce company.
The 140 million weekly visitors to Walmart stores in the US is what’s keeping Walmart in the game. That’s a lot of transactions, a lot of habits, a lot of shopping routines to try to displace. Just the sheer volume of foot traffic and the fact that everyday shopping is mostly habit and routine mean that not much has needed to change for Walmart. They have been the best in the world at moving products from point A to point B—the quintessential Distribution Economy company. Their innovations in distribution centers and supply chain built them into the company they are today. They have been able to think and act like a retailer for the past 20 years while Amazon slowly amassed an audience all around them.
But all that is about to change.
A Tale of Two Audiences
If you look at demographic trends in the US, you’ll see that we have a giant wave of Millennials coming into the market now and for the next decade. This is just a fact, and it means that their habits and routines are going to define the future—and their habits are different from the Boomers who built the big box retail boom of the 80s, 90s and early 2000s. To grossly simplify things, Walmart grew in the Boomer coming of age and Amazon is growing in the Millennial coming of age.
This means that Millennial habits are the future of retail, and their habits are everything, everywhere, all the time. That’s why the word omni, meaning “in all ways and in all places,” is such a good moniker for the kind of retail that they want. It will not be just one channel, one delivery method or one screen that dominates. They will want access to all channels all the time—and the ability to pull your products and services to them wherever they are. OMNIRETAIL will rule the day.
That’s what this battle is all about. Who will own the audience that will demand all these products? And right now, in terms of numbers, Walmart has the advantage. But in terms of strategy, Amazon has the edge, and both their momentum in the market and their results tell this story.
If you look at the revenue growth of Amazon vs Walmart for the past 10 years, then you see that Amazon’s YOY growth percentage averages 29.3% versus Walmart’s 4.2%. If you project this forward another 10 years, then a very different picture comes into view. By being generous to Walmart and holding their growth at 4.2%, but decreasing Amazon’s growth by 2% per year, you still see that Amazon passes Walmart in six years, and they hit $1 trillion in sales by 2026.
Amazon v. Walmart Audience Strategy
Walmart is missing the mark strategically when it comes to turning their shoppers into an audience, and nothing makes this clearer than the way the company has approached two-day shipping.
When Amazon launched their free two-day shipping service, they called it Prime and offered it as a $79 annual subscription. It has grown to almost 50% of US households in just over a decade.By making it a subscription, Amazon turned a simple customer service idea into a massive audience. There are more Prime subscribers than voted in the last presidential election.
Walmart announced free two-day shipping but didn’t require anyone to sign-up for it. Sure, they have your data and information on Walmart.com, but that misses the bigger strategic point. They are not building an audience, and Amazon is. This is how Amazon could offer additional audience-engaging services like video to their offerings—video that drives engagement with the company.
When you are trying to build an audience, you are thinking about where they live, what they are interested in, and how you can fit into their lives. When you are a retailer, you just think about your shoppers and how much they buy or how easy it is to pick up when they come to your store. To an Audience Economy company, launching Prime Video and Alexa make total sense. To a Distribution Economy company, you just want to sell someone else’s videos and consumer electronics. Why would you produce movies or make products?
As mentioned, shipping reveals the strategy. One company approached two-day shipping like an Audience Economy company thinking about their subscribers. The other approached it like a Distribution Economy company thinking about making shipping easier for their shoppers.
Is distribution still important? Absolutely. Is brand awareness (aka, mental distribution) still important? Now more than ever. But distribution is table stakes in the Audience Economy.
Coming in Part Two
This is just the retail side of the Audience Economy equation. In part two of this article (coming next week), we will look at the rise of Private Label, the impact of Voice on shopping, and the disintegration of ad-supported media as the Trifecta of Challenge for brand marketers.