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The Walmart and Amazon Effects



In 2006, Charles Fisherman coined the term 'The Walmart Effect' to describe the way in which Walmart is able to out-compete smaller businesses by leveraging large-scale buying power to offer consumers the lowest available prices. Due to the company's size, Walmart is able to negotiate prices which no other company would be able to achieve. This effect results in small companies being unable to compete, an ultimately shutting down. The term ultimately describes the effect which Walmart had and continues to have on the retail sector.

In 2012, Steve Weinberg coined the similar term 'The Amazon Effect' describing the effect that Amazon has on the retail sector. Here Amazon's strategy is to create enough incentives to consumers that they opt to change their buying habits to benefit from these incentives. Once consumers' habits have changed, other retailers are forced to adapt their business strategies or risk going out of business. Companies are able to adapt to new consumer habits allowing them to remain competitive with Amazon.

Both of these effects result in significant changes in retail sectors across the world. These changes also impact distributors, importers, and manufacturers throughout supply chain networks as the entire chain must adapt. In this way, these effects have wide-reaching impacts. Ultimately the Amazon effect has become the new Walmart effect, rapidly modifying customer behavior and retail as a whole. There is no telling what retailer will be the next to so completely disrupt retail as a whole that is will earn a title for its own effect.

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