Amazon’s and Walmart’s latest moves confirm the death of the middle class as we know it

Amazon and Walmart are battling for shoppers at the highest and lowest ends of the income spectrum, leaving the middle class in the dust.

Amazon, whose Prime service claims more than 70% of upper-income households in the US — those earning more than $112,000 a year — is suddenly going after customers on government assistance who earn less than $15,444 a year for a one-person household.

The retailer on Tuesday announced it would slash the cost of its monthly Prime membership nearly in half, to $5.99 a month, for customers who have an electronic benefit transfer card, which is used for government assistance like the Supplemental Nutrition Assistance Program, better known as food stamps.

“It’s a shot over the bow at Walmart,” said Doug Stephens, a retail-industry consultant. In other words, the strategy is a direct grab for Walmart’s core customers. Nearly $1 out of every $5 in SNAP benefits was spent at Walmart last year, according to Morningstar.

At the same time, Walmart is going after Amazon’s core customers with its $3 billion acquisition earlier this year of Jet.com, which attracts a younger and higher-income group of shoppers than Walmart. The retailer has also recently been snatching up trendy online retailers like ModCloth, Moosejaw, and Shoebuy, and it’s reportedly considering a bid for the high-end menswear brand Bonobos.

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Walmart and Target are refusing to surrender to Amazon

While many public companies focus their attention on embellishing their quarterly results, Amazon has always taken the long view.

The online retailer leader has invested heavily in infrastructure including a nationwide network of warehouses, robots which help ship orders, and even predictive technology that helps the company know what a customer plans to buy before he or she orders it.

Amazon even has a pioneering deal with the United States Postal Service which allows for Sunday delivery in some markets.

All of this has not come cheap, and it has hurt Amazon’s short-term profitability in some quarters, but it has helped the company build a strong competitive advantage over its chief rivals Wal-Mart and Target.

Those two physical retailers are struggling to change their supply chains to meet the needs of individual digital customers rather than stores. That’s a radical switch that requires major changes to how both brick-and-mortar chains operate.

But if either Wal-Mart or Target can hope to compete with Amazon, they have to recreate the digital leader’s ability to ship millions of products in a two-day window efficiently. Both companies seem to at least understand the problem and are taking steps to catch up.

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4 ways retailers can improve supply chain management

Retailers and their suppliers are under more pressure than ever before to deliver more goods to more destinations faster.

To stay competitive, “retailers need to know where things are at all times so they can redirect shipments, rebalance inventories and respond to new demands on the fly,” says Rich Becks, general manager, Industry Value Chains, E2open, which delivers cloud-based supply chain collaboration solutions.

And if there is a problem with their supply chain, and they can’t get products to stores and/or consumers, retailers (and their suppliers) risk losing customers.

So what steps can, and should, retailers take to make sure their supply chain operations are running smoothly? Following are four suggestions from retail supply chain experts.

1. Use cloud-based software that can track and manage inventory in real time.

“Retailers struggle to balance uncertain consumer behavior and long, complex supply chains,” explains Kurt Cavano, vice chairman & CSO, GT Nexus, a supply chain technology company.

2. Use source tagging and RFID to keep track of inventory and stock levels.

“To improve supply chain management from the moment product leaves the manufacturer’s warehouse all the way through to the point-of-purchase, retailers should deploy a source tagging solution,” says Steve Sell, director, North America Marketing, Retail Practice, Tyco Integrated Security.

3. Become a part of a B2B e-procurement network.

“B2B [or e-procurement] networks can help companies predict supply chain disruptions and act quickly to adapt business processes,” says Sundar Kamakshisundaram, vice president, Procurement and Business Network Solutions, Ariba, an SAP company.

4. Make sure your marketing and supply chain teams are in sync.

“When executing a promotion, a lot of retailers overlook the alignment of the supply chain and marketing teams, which is crucial [if you want] to successfully launch a promotion,” says Pat Sullivan, senior vice president, Promotions Management, HAVI Global Solutions, a consulting company.

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