While Chris Smalls’s union win on Staten Island placed Amazon in an unprecedented position, the company was facing other major transitions amid the daily turbulence of a world besieged by an ongoing pandemic and supply chain woes. In February 2021, a year before the union win, Amazon had announced that Jeff Bezos, the only CEO the company had ever known, would be passing on his role that July to a longtime executive named Andy Jassy.
Early in his career, Jassy had served as Bezos’s first technical adviser—also known as a “shadow”—a role similar to a chief of staff that would become one of the most sought-after positions at the company for those with grand ambition. Jassy then spent fifteen years launching and running Amazon Web Services, Amazon’s unsexy but innovative and highly profitable cloud-computing business that powers websites big and small and generated $62 billion in revenue in 2021 alone.
“The hallmark of most great leaders at Amazon is they combine passion and customer obsession with the ability to dive deep into the details, the metrics, the [profits and losses],” Bill Carr, the former head of Amazon Prime’s video offering, told me after the CEO transition was announced.1 “But a great leader at Amazon can operate at fifty thousand feet above sea level as well, and Andy is one of those people.”
Jassy inherited serious challenges on several fronts. One was to attempt to balance the seesaw of customer shopping habits as Covid waves crashed and then receded. For the first year or so of the global crisis, for example, online ordering exploded as a world of customers was locked in their homes either by government mandate, illness, or precaution. Pundits were predicting that online shopping was going to take over much sooner than previously understood—making up five to ten years of ground in a single twelve months.
But a funny thing happened in 2021 and 2022: brick-and-mortar shopping made a comeback.
For Amazon, its past moves toward a more balanced portfolio of sales channels now looked prescient. In addition to the acquisition of Whole Foods, Amazon was creating a new grocery store chain called Amazon Fresh—the same name that accompanied its ship-from-warehouse grocery home delivery service. The stores were designed to sell at lower price points with more mainstream brands—think Doritos and Oreos—than its upscale corporate sibling, Whole Foods. The first location, a 35,000-square-foot store in Los Angeles, opened in September 2020 and was outfitted with tech-infused shopping carts called “Dash Carts,” which used cameras and sensors to calculate a customer’s order as they placed items into them. The stores would also double as mini-warehouses to help fulfill Amazon Fresh delivery orders.
By the fall of 2022, there were forty-three Fresh locations, more than half of which were located in California and Illinois. A year earlier, Amazon had added a $9.95 delivery fee for Whole Foods orders for Prime members to account for rising operational costs, the company said. It was a very un-Amazonian, and arguably anticonsumer, move to begin charging money for a service that had previously been included in a Prime membership. Lawsuits followed.2
“We had a decision: we could think about raising prices broadly on products, or we could isolate it into a fee for the service itself,” Stephenie Landry, then the Amazon VP in charge of grocery delivery services, told me in late 2021. “We decided to do the latter . . . because we wanted to keep product prices low.”
The move angered a vocal subset of Prime customers but also gave an opening to Walmart, which used the opportunity to market its grocery-centric delivery membership Walmart+ to existing Amazon Prime customers. Meanwhile, Amazon Fresh deliveries remained free for Prime members for orders over $35, which meant that either the service’s costs were not rising like Whole Foods’ were or that Amazon was okay raising the price of individual food prices at Amazon Fresh behind the scenes.
Amazon never announced this intent but, sure enough, Amazon Fresh prices began to rise between 2021 and 2022, and it wasn’t just inflation. For example, one month after a new Amazon Fresh store opened in the Chicago area in early 2021, a random sampling of groceries at the store cost about 4 percent more than a comparative sample at Walmart. At that point, Amazon Fresh could be confused for a Walmart Supercenter competitor.
But a year later, the cost disparity between the two grocers had widened to more than 25 percent, according to an analysis by the grocery research firm Brick Meets Click. Whether by design or not, it sure looked like Amazon was launching in certain areas with incredibly low prices that almost matched Walmart’s, giving shoppers the impression of being a discount food chain, before gradually increasing them to compete more directly with regional full-price grocers like Jewel Osco in Chicago and H-E-B in Texas.
Either way, Amazon executives believed that the fact that customers were returning to stores to shop bolstered one of their key defenses against antitrust hawks: that the physical retail world was far from dead, and the future lay in the intersection of digital and physical.
“In the retail world, customers are voting that all of these hybrid models that combine physical locations and online tools are very valuable to them,” Jeff Wilke, the former CEO of Amazon’s worldwide consumer business and Bezos’s longtime No. 2, told me in early 2021. “I continue to struggle to find a customer who . . . wakes up and says, ‘What do I want to buy online today?’ They wake up and say, ‘What do I need?’”
This argument—that Amazon competes in all of retail and not just in a separate online market where it controls more than half of sales in some product categories—would be repeated over and over again as the company faced a barrage of antitrust scrutiny in the early 2020s. Amazon’s main argument was that whatever its market share was in US e-commerce—around 40 percent, according to a common estimate, but higher in several core online retail categories—it only accounted for a single-digit percentage of the overall US retail market, including brick-and-mortar shopping.
Still, Amazon seemed intent on building the Everything Retailer, and the flip-flop of where consumers were shopping made it seem crucial to its long-term ambition. Store sales were rebounding. E-commerce growth plateaued. That’s why, at least on the surface, it was curious when Amazon announced in March 2022 a major retrenchment in physical retail: the closure of sixty-eight of their physical stores that sold books, electronics, and other general merchandise in the US and UK and had been built as part of a seven-year experiment.
Among them were bookstores, under the name Amazon Books, which first opened to the public in 2015. The stores were designed to bring some of the benefits of shopping for books on Amazon.com into the real world, such as a book’s customer rating. They were also about—even more so, according to some former store employees—selling customers on Amazon gadgets such as Kindles and Alexa-powered Echo smart speakers and tablets. On top of that, the stores were also used as a way to sign up customers to trials for subscription services, such as Amazon Prime and the audiobook service Audible.
Once the pandemic hit, and the bookstores reopened after a monthslong shutdown, some store leaders urged store managers to increase the percentage of customers who agreed to sign up at checkout for a free trial of one of these services. But this prodding took a shady turn in some cases. Prior to the pandemic, store customers could view one of the free trial offers on a screen in front of them. But to reduce customers potentially spreading germs once the pandemic hit, bookstore cashiers were also given the ability to sign the customer up for a trial from their side, after explaining the offering and asking for permission from the customer. However, employees who worked at some Amazon Books stores on the East Coast told me that their managers often automatically signed customers up for free subscription trials, such as the audio service Audible, without giving them the choice.
“They would tell them, ‘This is your subscription. You can cancel it anytime,’ instead of giving them the choice to hit ‘No thank you,’” a former bookstore employee told me. “I don’t think customers even realized it.”
Many didn’t, not until months later, when they would return to the store, befuddled or irate, to inquire why they were being charged for a subscription they didn’t remember registering for. In October 2020, Chris Garlock, an assistant manager in one of the Amazon Books stores, emailed a regional manager explaining that a former colleague had observed store employees accepting the free trial on behalf of a customer without getting their prior consent. Garlock had also looked up internal data that showed that some colleagues were signing up store customers for free trials at abnormally high rates compared to their previous performance and that of employees at other stores.
“A consistent pattern like this does real damage to a brand’s reputation and business,” he wrote. “But more to the point, it is unethical; to trick or defraud a person into receiving something they didn’t choose is wrong and shouldn’t be something we allow or condone at Amazon.”
For several more months, though, internal data indicated that managers and sales staff at several stores were still signing up customers for free trials at abnormally high rates. Finally, in early 2021, store managers received a stern reminder of the right way to offer the free trials to customers.
“Good on them to do that,” Garlock told me, “but this is something they should have done months prior.”
Amazon spokesperson Jordan Deagle told me that there was no corporate mandate to increase sign-ups for free trials of Amazon subscriptions. In early 2019, after some Amazon Books customers complained about being signed up for free trials, division leaders reviewed training and explained to associates how to more clearly explain the terms and conditions of the subscription trials to customers, the spokesperson said. But Deagle declined to comment on how or why such behavior was occurring well into the following year.
Managers were also known to offer on-the-spot discounts to unload Amazon devices to help hit internal goals for units sold. Rumors spread among staff in some stores that some managers even occasionally bought store merchandise themselves to boost sales, only to later return it.
“Digital subscriptions and device sales were much more important than any of the book sales,” another former store associate said. “That’s what our manager made sure we knew.”
The e-commerce giant just couldn’t break away from its digital DNA, even in a physical store setting.
Before Amazon announced the closures publicly, store leaders received a message instructing them to shutter their storefront at 1 p.m. local time that day. As soon as the store was shuttered, they received a follow-up message with the bad news: all Amazon Books stores were closing at the end of April.
The announcement was made shortly after Amazon had hired a longtime retail executive, Tony Hoggett of UK supermarket giant Tesco, to take over the physical store operations. Though the decision to cut the Books stores, as well as a smaller chain called 4-star that sold general merchandise, was made before the new executive joined, there was little surprise inside some corners of Amazon that it happened nonetheless.
“It had very little clear direction of purpose, and no real differentiating factor,” one corporate employee who worked in the store division told me. From a financial perspective, the meager revenue generated from the stores served as a sore spot to those leading the much more crucial e-commerce business. In a way, the resentment was not all that different from what fueled the Walmart battles between e-commerce and store leaders, but reversed.
Amazon’s drive to building the Everything Retailer had hit a pothole. A big one.
The Store Advantage
A few days after news of the closures broke, I found myself at Walmart’s home office in Bentonville, seated across from Doug McMillon himself. I told him I was curious for his thoughts on the physical retail about-face of his chief internet rival. Would McMillon offer up any version of a chiding or I-told-ya-so? Before the question finished tumbling from my mouth, McMillon let out a little chuckle, leading me to believe he might.
“Both are hard; e-commerce is hard, stores are hard,” McMillon said instead, matter-of-factly. “And when something’s not working, cut bait and move on. Try something else.”
After all, McMillon could have been giving himself a pep talk, especially as the company endured the challenges of unifying its store and e-commerce operations under one leader in John Furner, the former Sam’s Club CEO who replaced Greg Foran as Walmart US CEO in late 2019—a few months before the Covid-19 pandemic erupted.
Under Furner, the company forced a large swath of its e-commerce workforce to relocate to Bentonville from offices on the coasts, or give up their job altogether, though with a generous severance package. The move was pitched as a necessity to running a unified retail operation where some divisions such as merchandising were now responsible for both Walmart’s websites and stores. Walmart management also felt pressure to bring more of the workforce back to Arkansas because the Walton family was spending heavily on a new 350-acre corporate campus scheduled to open in phases through 2025.
Publicly, Walmart confirmed the layoffs of 1,200 corporate workers as the e-commerce and retail divisions combined. But a source familiar with the move said the real number was upward of 3,000 people. While power was centralizing under Furner, the hope was that the unified organization would actually help Walmart move faster. Amazon had taken the opposite approach over the years. The organization became famous in the business world for its so-called two-pizza teams—a group of employees given the autonomy to pursue a new idea for a product or service and which was small enough to be fed by two pizzas. With his move to Walmart from Sam’s Club, Furner brought with him a different approach, known as “four in a box.”
Like the two-pizza team, it was designed to increase the speed at which the company could test out new ideas, products, and services or solve thorny problems, whether for store workers or for customers. The organizational structure called for one member in the team to be from the appropriate business division, one employee to represent the customer or user experience, one from the engineering group, and a final one who’s from the product design organization. The alternative, legacy approach is someone in the center coming up with a cool idea and then handing it over to a team to start to build.
“What ends up happening, in my opinion, if you’re not careful is people find really cool solutions and then they go try to find a problem to attach it to,” Furner said.
Furner’s arrival also caused a variety of other changes. The company’s long-questioned separation of its e-commerce ordering systems into two separate shopping apps finally ended. While there had once been technical, philosophical, and business reasons to run the two separately, those days were long gone. To Furner, who tended to lean into the digital world more willingly than his predecessor Foran, the confusion that arose from competing corporate interests had gone on too long.
“If a customer was in the orange app, which is really the grocery app, and they typed in Legos, it would say nothing available,” Furner said. “What I was always worried about then was the swipe of the app—does that lead them to go to the blue app or does it lead them to go to a competitive app where you just know [the Legos are] going to be?”
In many cases, the answer was clear and would not favor Walmart. Furner knew it. Orange and blue finally came together in 2021, with the hope that it would create an e-commerce future brighter than any brown that a mixture of those two colors might produce in the real world.
Having taken over shortly before the start of the pandemic, Furner oversaw a host of other initiatives to help Walmart satisfy changing consumer habits. For far too long, Walmart had neglected the advantage that its Supercenters posed as potential mini-warehouses to serve online customers in their area. Amazon executives long knew that if Walmart could figure out how to unlock deliveries out of their stores, the retailer could potentially beat Amazon in the convenience game with same-day delivery or faster.
But it was difficult for a giant retailer like Walmart to get an accurate enough reading on in-store inventory to ensure that online customers weren’t disappointed by out-of-stock messages after placing an order. That’s one of the reasons Walmart invested heavily in a startup called Bossa Nova Robotics, whose robots roamed Supercenters and reported back on inventory information, before Furner blindsided the startup company and its leaders by ending the partnership right in the middle of a nationwide rollout in late 2020.3 Even still, other retailers, including Target, used in-store inventory to fulfill online orders well enough to prove it was possible.
With the onset of the pandemic, Walmart no longer had a choice. At the center of heightened consumer demand was a rise in online grocery ordering—both from customers looking for delivery and ones seeking curbside pickup. While the company struggled to keep up there—Walmart actually ceded 10 percentage points of market share to Instacart in the US online grocery market during the first year of the pandemic, according to an internal memo I viewed4—it began utilizing its four-thousand-plus store footprint, and the inventory within, in other ways.
“Literally over a period of like, three or four weeks, we started being able to ship out of 2,500 stores, because we had to,” said Greg Smith, Walmart’s supply chain chief from 2017 until early 2021. “And then all of a sudden, we got more bold about connecting it all.”
Walmart also made conversions to about three dozen of its distribution centers—warehouses typically used to ship products to stores—to allow them to serve as fulfillment centers, too, shipping merchandise to customers’ doors. Eventually Walmart also got more aggressive in rerouting online orders from the fulfillment centers that historically filled e-commerce orders to local stores that had the merchandise in stock. The result was a customer experience that at some points felt like magic—order an item online, expect it to show up in two to four days, and instead end up finding it on your porch that same day, in a Walmart shopping bag instead of a box or plastic mailer.
“I’m pretty biased to get the customer what they want, when they want, and how they want it,” Furner told me. “Our job is to figure out how you do that in a way that your costs are low enough that you can have a winning value. Because there’s a phrase I think about a lot that goes something like, ‘Loyalty in retail is the absence of something better.’”
That fear is also a key reason Walmart introduced an even faster delivery option in 2020 with Express Delivery, which promised grocery or merchandise orders at your door within two hours. At a weekly Monday meeting Furner hosts with staff, the CEO tests the service, which costs $10 per delivery for Walmart+ members and a steep $17.95 for nonmembers. During this period, Walmart also began testing a new mode for fast delivery: drones. Another area where Amazon first attracted attention.
All the way back in 2013, on the eve of the Cyber Monday shopping holiday, Jeff Bezos, in a made-for-TV spectacle, announced that Amazon had started testing drone delivery. He predicted that the service would be available to customers in four or five years. But by 2021, Amazon’s tests were still limited to a handful of employees and a few others. One reason is that Amazon was building its own drones, rather than farming out the work. It was not smooth. The tech giant caught the ire of the Federal Aviation Administration during testing, including one crash that ignited a twenty-five-acre brushfire in Oregon.5 The company reportedly spent more than $2 billion on the initiative in the first eight years, with little to show for it to the outside world.
Walmart, on the other hand, got some tests off the ground in its home state of Arkansas in the fall of 2021, via partnership tests with two companies, DroneUp and Zipline. On a visit to Bentonville in early 2022, I made my way out to Pea Ridge, Arkansas, population 6,559, to witness a drone delivery up close. At first I was pitched on watching a live customer delivery, but ultimately I was shown a demo flight instead; the change of plans went unexplained.
The fifty-pound Zipline drone launched out of a catapult-like device at its cruising speed of 60 miles per hour. It then traveled in a half-circle direction while navigating 25 mile-per-hour wind gusts, before dropping a blue Walmart box, affixed to a small white paper parachute, over an open field owned by Walmart. After the drop was made, the drone automatically calculated wind speeds and directions to decide on the best path back to base. It then returned at 40 miles per hour, catching its tail on a zipline stretched between two metal poles, or “recovery arms,” in the company’s lingo, to end the flight.
By the spring of 2022, Walmart had announced that its other partner, DroneUp, was helping it launch drone deliveries in a total of thirty-four locations with the ability to reach 4 million households across six states. In these areas, customers could pay $3.99 for a drone delivery order, from a selection of more than 10,000 items, that weighs less than ten pounds in total. Zipline got its start by making humanitarian drops in conflict zones. But here, in the great consumerist country, the drone missions were solely focused on first-world convenience.
“[W]hile we initially thought customers would use the service for emergency items, we’re finding they use it for its sheer convenience, like a quick fix for a weeknight meal,” David Guggina, a former Amazon employee turned Walmart exec, said in the Walmart press release announcing the move. “Case in point: The top-selling item at one of our current hubs is Hamburger Helper.”
While Walmart sped ahead of Amazon, at least on the surface, in testing the next generation of speedy delivery, Amazon was still trying to get a different express delivery service back on track. Back in the spring of 2019, before the Covid pandemic, Amazon had stunned Walmart by announcing that the core Prime membership expectation of two-day shipping was moving to a one-day norm over the course of the year. At that exact time, Walmart was also readying for its own announcement regarding a next-day-delivery offering. But once the pandemic hit, Amazon had enough trouble getting packages to customers even in a week. One-day Prime was mostly a pipe dream. Two years later, in 2022, the one-day service still seemed to be nowhere near standard, even as Amazon hiked the price of Prime from $119 to $139 a year. As late as the second half of 2022, many Prime deliveries didn’t even guarantee two-day shipping; rather, just “free shipping.” In fact, in the summer of 2022, a former Amazon logistics analyst, named Peter Freese, conducted an experiment in the company’s home state of Washington, after being flabbergasted that two-day shipping seemed to no longer be available in his hometown, a few hours from Seattle. He found that in one-third of all counties in the state, top-selling Amazon products labeled as Prime-eligible would take a minimum of four to five business days to arrive. Other Prime members in communities across the country talked of a similar disappearance of Prime two-day shipping. Something seemed up.6
Issues like these have long been John Felton’s job to obsess over. Felton was Amazon’s head of worldwide delivery services throughout the first two years of the pandemic. In an interview in early 2022, he would not accept that Prime was far off the performance of pre-pandemic days. But he did admit that there was still much work to do to deliver on the one-day-shipping promise that was by this point mostly a three-year-old mirage.
“My job is to wake up paranoid about we are not being convenient enough for customers,” he told be.
In the middle of 2022, Felton was named the head of all of Amazon’s operations divisions, after Amazon’s consumer and operations leader Dave Clark—the former warehouse leader once known as the Sniper—stunned the business world by leaving Amazon for a CEO role at an up-and-coming supply chain startup. With Clark’s departure, Felton was promoted and added the warehouse and transportation networks to his existing purview of delivery offerings. Amid the shuffle, the two executives who had been running warehousing and transportation divisions as his peers exited the company, much to the disappointment of rank-and-file employees. They were two of the most senior Black executives at the company, including the only one at the time to ever serve on the CEO’s senior leadership team, known as the S team: a longtime GM executive named Alicia Boler Davis, or ABD as she was known internally.
For a few years, Jassy had been the executive sponsor of Amazon’s Black Employee Network, an affinity group for rank-and-file employees. When he took over for Jeff Bezos as CEO, some employees hoped that the company would do a better job attracting, promoting, and retaining top Black talent, especially given promises the company made after George Floyd’s murder in 2020. As I exposed in a series of stories in 2021,7 Black corporate employees at Amazon I spoke to said they often faced bias and discrimination at the company.
“I think the ‘accomplishment’ of getting a corporate role at Amazon—the best-paying role of my life—and the opportunity to do something at a scale I never imagined, ended up with pain and trauma I could not have anticipated,” a Black female PhD who worked at Amazon for several years told me for Recode in 2021.8 “I’ve never felt more used and disposable in my life.”
Amazon staff who worked on diversity and inclusion initiatives at the time told me that internal data showed that Amazon’s review and promotion systems created an uneven playing field where Black employees received “least effective” marks more often than all other colleagues and were promoted at a lower rate than non-Black peers. Recode reviewed some of this data for the Amazon Web Services division of the company, where Jassy was CEO until succeeding Bezos, and it showed large disparities in performance review ratings between Black and white employees. At the time, Amazon disputed the specifics of the data but declined to provide alternative data.
Over the next few months, a half-dozen women who worked in corporate roles at Amazon sued the company, with most alleging race discrimination. Watching two of the most senior Black leaders leave the company when a white male peer was promoted over them did nothing to boost the mood. Around the same time, two other Black executives also departed from senior roles at Amazon. The average tenure of the four corporate leaders was less than three years.
“In my mind I’m thinking, ‘What do they know that I don’t know?’” a Black midlevel manager in Amazon corporate told me at the time.
Amazon and Antitrust
As Amazon continued to attract scrutiny over its treatment of both warehouse and corporate employees during the first two years of the pandemic, the company also drew unwanted attention from politicians and regulators alike that had been years in the making.
In the late 2010s, the power and valuations that Amazon and other titans of the technology industry were accumulating incited a new movement in antitrust circles, catalyzed by a law school paper written by a then-unknown law student named Lina Khan. In her seminal paper, “Amazon’s Antitrust Paradox,” published in the Yale Law Journal, Khan argued that our interpretation of antitrust laws was outdated in light of a new digital economy, and there was a need to return to the days when merely having low prices or providing free services wasn’t enough to avoid scrutiny for anticompetitive behavior. At the core of her argument, and of those Big Tech critics who promoted her view, was that the tech giants like Amazon had built the new railroads of the web and were the gatekeepers to all sorts of crucial interconnected parts.
“Amazon doesn’t just want to dominate markets; it wants to own the infrastructure that underpins those markets,” said Stacy Mitchell, the longtime critic of both Amazon and Walmart who runs a left-leaning think tank called the Institute for Local Self-Reliance (ILSR). “And that’s an order of magnitude difference of a monopoly ambition than Walmart’s.”
Mitchell had spent many years agitating for the government to step in to slow down Walmart during its go-go Supercenter growth years and she is still clear today that she finds the company’s power over some sectors problematic. “They dictate across the entire food chain,” she said. But in her view, and that of many Big Tech critics in her circles, Amazon poses an altogether different threat to business competition.
“It’s not just the retail platform, but it’s AWS [Amazon Web Services], it’s the logistics piece, it’s [Alexa] and being the interface for how we interact with the web, and all the devices and everything that are connected to the smart home,” she said. “It enables Amazon to favor its own goods and services in those markets, to levy a kind of tax on all the businesses that rely on that infrastructure, and to surveil all of that activity and use that intelligence to its own advantage.”
As the pressure from Washington, DC, increased, Amazon leaders were becoming heated. In one key annual meeting of Bezos’s senior leaders in early 2020, Jassy, the then-CEO of AWS, digested the content of a memo sitting in front of him. It laid out Amazon’s plans for messaging in response to accusations that it was too big or too powerful and engaged in anticompetitive behavior. As Bezos listened in by phone, Jassy pointedly asked those before him why the messaging didn’t argue that Walmart, and AWS rival Microsoft, should be investigated. Other top company officials tried to explain that each of those companies had already been scrutinized years ago and their time had passed. But Jassy’s reaction left a lasting impression on those in attendance.
“It was very clear from his comments that we shouldn’t let our foot off the gas,” someone in attendance told me years later.
In subsequent years, especially in the part of the company that focused on so-called competition issues, “there wasn’t a day that Walmart didn’t come up.” The fact that Walmart, with more annual revenue than Amazon, was not being scrutinized by policy makers drove executives like Jassy crazy. It didn’t help when Amazon executives discovered that Walmart was indirectly funding a nonprofit front group called Free and Fair Markets, which was bombarding reporters and social media with anti-Amazon accusations. For some time, Amazon leaders suspected that a competitor, or group of competitors, was funding the operation but couldn’t prove it. One of Amazon’s longtime spokesmen, Drew Herdener, grew frustrated every time the group placed an op-ed or social media message that got traction.
“How does the press not know this is a front group?” he would lament.
As a result, an Amazon communications staffer named Doug Stone spent upward of a year trying to help reporters uncover the group’s funders. Finally, in the fall of 2019, the Wall Street Journal pulled back the veil in an exposé titled “A ‘Grass Roots’ Campaign to Take Down Amazon Is Funded by Amazon’s Biggest Rivals.”9 A Walmart spokesperson denied funding the group to the newspaper—the article had stated that Walmart used an intermediary to pass along funds to FFM, so the company’s defense might have been a matter of semantics—but said that Walmart “share[s] concerns about issues” that the group was publicizing.
That same year, lawmakers on the House of Representatives’ Subcommittee on Antitrust, Commercial and Administrative Law announced a congressional investigation into alleged anticompetitive practices of Amazon, as well as Google, Facebook, and Apple. Lina Khan, the former law student who wrote “Amazon’s Antitrust Paradox,” was hired as a legal counsel to help research and write the report, though she did not craft the section on Amazon. The investigation was highlighted by a CEO hearing in 2020 in which all the chief executives, including Jeff Bezos, testified in front of the lawmakers. The theatrics, however, were muted by the business leaders testifying virtually via videoconference, instead of in-person, because of the Covid-19 pandemic. It would be Bezos’s first time testifying in front of Congress and, initially, some top Amazon company officials without experience working with or in the government wanted to politely decline the congressional invitation and offer up another company executive instead.
“There was some magical thinking going on,” a person familiar with the deliberations told me.
Eventually, they relented and Bezos agreed to testify.
Months later, the congressional investigations staff delivered a four-hundred-page report outlining each company’s alleged misdeeds and policy recommendations to help rein them in. The report argued that Amazon unfairly gleans data and information from its third-party sellers that it uses to strengthen the retail side of its business, including favoring its own product brands over those of competitors, giving this merchandise exclusive space on its virtual shelves, and prioritizing it in search results. Another criticism was that Amazon can charge sellers ever-increasing fees for everything from advertising to warehousing because of its dominant position, and that most sellers and brands have practically no negotiating power. Amazon also was known to penalize sellers if they sold their merchandise for lower prices on other retail sites—even their own—a practice that some sellers argued artificially inflates consumer prices across the web.10
During the congressional probe, some close to the investigation who had initially thought the practices of Google and Facebook were much more problematic than Amazon’s ended up being blown away by many facets of Amazon’s business practices. One finding that stood out was just how many huge Fortune 500 brands felt bullied by the tech giant and unable to negotiate fair deals. On the other end of the business spectrum, staff members were stunned by how easily the tech giant could kill small businesses overnight through many means, including a simple change to the search engine algorithm on Amazon.com, cloning a seller’s product under an Amazon brand, or accidentally booting a seller off the platform because of an unwieldly algorithm. The power disparity was not all that different from the one Walmart had enjoyed for so many years.
To make matters worse, those investigating Amazon also discovered how impossible it can be for merchants selling on Amazon to get clear answers for why the company has punished them, or even get a helpful human on the phone. In one of the most moving moments of the hearing, a congresswoman played a recording of an interview with a woman who owned a textbook-selling business on Amazon with her husband. This small business owner told the story of how their family business was suddenly kicked off the platform without notice or explanation, instantaneously wiping out their livelihood and that of more than a dozen employees.
That same year, the love-hate relationship between Amazon and some of its top sellers seemed to reach a boiling point when merchants began consistently airing their grievances on Twitter, where some had developed strong industry followings. One of them, Shinghi Detlefsen, also possessed another trait that caught the attention of Amazon higher-ups: he had previously worked for six years in technology-related roles inside Amazon before leaving to help run a retail business on Amazon that his wife had started. After continuously tweeting complaints and suggestions at Dave Clark, Amazon’s then CEO for its global consumer business, he finally got a response in March 2021. Soon after, Amazon’s VP of seller support, Dharmesh Mehta, became active on Twitter, responding to some of Detlefsen’s tweets and telling the seller community to keep the feedback coming. All was not suddenly right in the world of Amazon’s treatment of its small merchant partners, but someone was finally listening, and to some top sellers, that felt at least like a start of better, fairer days selling on the platform.
As for the congressional investigation, it was not the end of Amazon’s troubles. The report, and its policy recommendations, led to companion bills being brought forward in both the House and the Senate in 2022 that, if passed, had the power to seriously upend the way Amazon does business. They would prevent the tech giant from favoring some of its own products and services, whether its own brands of products such as Amazon Basics batteries, or its Fulfillment by Amazon warehousing service for merchants. Publicly, Amazon fought the bills aggressively, in some cases partnering with Google to fund front groups that ran TV ad blitzes alleging the legislation would potentially kill Amazon Prime. Behind the scenes, however, Amazon executives stressed to lawmakers all the warehouse jobs they had created in a given congressional district—“good jobs,” as they would repeat over and over again.
As scrutiny ramped up in previous years, Amazon executives had discussed internally what significant business changes they might be willing to make if push came to shove, as an olive branch of sorts to regulators or legislators. One that sources said some executives agreed on was to give up their so-called private-label business—essentially the practice of selling merchandise under Amazon’s own brand names. As of early 2023, though, they were still in the private-label business.
Still, the Federal Trade Commission continued to probe Amazon’s business practices behind the scenes. A year earlier, the odds of the antitrust enforcement agency taking some action against Amazon seemed to jump when President Joe Biden nominated the thirty-two-year-old Khan to fill one of the five FTC commissioner roles and to lead the agency as its chair. It was a remarkable ascent for the former counsel on the congressional Big Tech investigation who was a complete unknown in Washington prior to publishing “Amazon’s Antitrust Paradox” just four years earlier. In Europe in late 2022, Amazon agreed to a series of changes to its website and business practices to settle charges by regulators that the company engaged in anticompetitive behavior.
Taken together, the combination of significant turnover at the top of Amazon and scrutiny from all sides should have provided vast openings for rivals, chief among them Walmart. The question, as always, was how committed Walmart was to continuing to reinvent itself, and how quickly Doug McMillon could turn the ship around.
Walmart 2040
Before Marc Lore, the e-commerce impresario, left Walmart for good in 2021, he and a strategy executive named Sloan Eddleston crafted a memo, dubbed “Walmart 2040,” to document the changes they advised the retailer to pursue if it wanted to still be thriving in two decades. Many longtime executives still believed that Walmart would eventually beat Amazon by offering lower prices—both on the internet and in stores, especially if new legislation or antitrust enforcement forced the company to split into parts. Lore dismissed this thinking as wishful and antiquated.
In his assessment, there were three crucial facets of retail wars over time: price, selection, and convenience. Walmart, Lore believed, would have a very difficult time beating Amazon on price because Amazon has a much larger product catalogue powered by hundreds of thousands of independent merchants. Those merchants boost Amazon’s profits through the various fees they pay to sell through the site. He also believed Amazon would be tough to overtake in convenience because of the broad adoption of Amazon Prime, its massive warehouse network blanketing the country, and the buildout of its own giant delivery network.
The only answer, in Lore’s view, was to pursue leadership in the buzzy, but still nascent, retail area called conversational commerce. Essentially, selling goods via voice interactions with smart speakers or text message conversations, like his first internal startup, Jetblack, had tried to do. Lore and Eddleston envisioned a one-on-one personalized shopping experience at massive scale. Text your desired product—or type of product—or describe the recipient of a gift you need to buy—and let Walmart do what it has done well since Sam Walton dreamed up the crazy retail innovation sixty years earlier. Merchandise. Curate.
Walmart could stop chasing the idea of matching Amazon in the breadth of its product listings if it could push the best product for every customer interaction in front of a person rather than have them search through the increasingly messy bazaar of Amazon or Walmart’s websites. Amazon, in Lore’s view, has weaknesses, and curation is absolutely one of them. Hyperpersonalization would beat unlimited selection. If there was one thing Walmart proved with the expensive experiment of Jetblack, it was that the service weakened a customer’s reliance on Amazon.
McMillon seemed to grasp the idea, and the promise. But enough to invest what it would take? A billion or maybe multiple? Lore doubted it.
To be fair, McMillon still had other big investments that took priority in the short run, both in the US and abroad. In India, in 2018, Walmart made the biggest acquisition in its history, spending $16 billion for a 77 percent stake in a fast-growing e-commerce company called Flipkart. Flipkart’s chief rival in India? Amazon, which Walmart had to outmaneuver to keep Flipkart out of its hands.
With both companies never making the progress they wanted in the biggest international e-commerce market of China, India was seen as the next online shopping battleground, thanks to its huge population, growing middle class, and cheap mobile data, which saw many Indians logging onto the internet for the first time with their mobile phones. Walmart chairman, and Sam Walton grandson-in-law, Greg Penner, was a huge proponent of the deal.11
“Let’s go for the kill,” Penner reportedly told Walmart’s fellow board directors when the group was considering whether to make a minority investment in the young company or buy total control.
Outside India, the company was also investing big in new initiatives. Health care was one. Spending billions on robotics and automation additions to fulfillment centers and its old-school distribution centers was another. But many were extensions of the retail business that looked very similar to Amazon’s ecosystem. While Marc Lore drove some of those decisions—one of his former senior leaders told me that Lore was adamant that Walmart expand its product marketplace from other sellers as wide and fast as possible despite arguments for restraint—Doug McMillon had also grown extremely attracted to the idea of “making money while we sleep,” according to a former company insider.
In an interview in his office in early 2022, McMillon stressed the importance of these new business lines and more, including the membership program Walmart+, an online advertising business called Walmart Connect, and a new business that sells access to sales trend data from Walmart.com transactions. All three business lines come with inspiration, in one way or another, from Amazon. Walmart even hired one of Amazon’s former top advertising executives in 2021 to oversee them. Years earlier, Walmart hired a different former Amazon leader to run Walmart Fulfillment Services, the retailer’s version of Fulfillment by Amazon—both services that charge online merchants fees to store and ship their orders for them.
“It’s sort of ironic,” a former Jet executive told me. “We ended up going down more of an Amazon-type route.”
Of the portfolio of new business lines just getting off the ground in the early 2020s, McMillon said the goal is to “end up with a more diversified and resilient business over time because you’re making money in different ways.” While much of the media’s focus remained on just one area of this business line expansion—the Amazon Prime competitor called Walmart+—the CEO said he was going to do his best to divert investors’ and journalists’ attention away from the service.
“I’m glad we have it, and it’ll grow,” he said, “but I’m going to try to keep the world from focusing on that more than they should. Think about what we’ve talked about for almost an hour and we haven’t gotten to this subject. It is not the most important thing in the company. It’s a thing in the company.”
That may have been the whole story, but it also could have spoken to early struggles to build a customer base. A year earlier, I had reported that an internal company memo revealed that the membership team needed to improve renewal rates as well as the percentage of free-trial participants who went on to become full paying members.12
Walmart also was aggressive in pressuring its employees to register for a membership,13 which the company provided to them for free. But by the fall of 2022, two years after launch, Walmart+ still only had an estimated 11 million members in the US, compared to nearly 170 million for Amazon Prime. That November, Walmart offered the membership at half price for two days. As Marc Lore once told me, Walmart would eventually need to convince Amazon customers to cancel their Prime membership and defect to Walmart+ if it was going to do more than simply tread water.
Either way, it was clear in our conversation that McMillon wanted to set conservative expectations for the Walmart membership program. It would be an uphill battle to even come close to competing with the Amazon Prime wrecking ball. After all, corporate conservatism had spread like a weed inside the onetime retail innovator in the two decades between Amazon’s birth and McMillon’s Walmart takeover. Could McMillon, finally, against his own makeup, break that trend once and for all?
“I’m not naturally a risk taker,” he told me. “I don’t gamble. I don’t jump off bridges with a bungee cord. I don’t. I’m not a risk taker.”
“But this company,” he added, “to be here in the next generation, has to take risks.”