Berkshire Hathaway has largely exited its shareholding in 55 year old, $482 billion company Walmart. Why?
In 2012 Walmart’s CEO Mike Duke said that his biggest regret at the company (Walmart CEO from 2009 until 2013) was not moving more quickly into ecommerce.
“I wish we had moved faster. We’ve proven ourselves to be successful in many areas, and I simply wonder why we didn’t move more quickly. This is especially true for e-commerce,” Duke said at the time. “Right now we’re making tremendous progress, and the business is moving, but we should have moved faster to expand this area.”
The consequence of the delay has impacted Walmart’s ability to compete with Amazon. The numbers underline the cost of Walmart’s late arrival to ecommerce. In 2015 Walmart’s online sales were $13.7 billion while Amazon achieved $107 billion. Walmart is a huge retailer with sales at $482 billion, more than four times the size of Amazon but size is no longer a sufficient guarantor of success in the face of digital disruption.
Since Berkshire Hathaway invested in Walmart in 2005 the Amazon share price has grown more that 2000%. In the meantime Walmart has lagged the performance of the S&P 500. The market is clearly indicating concerns about the prospects of ‘traditional’ retailers in competing with Amazon and other disrupters.
This week Berkshire Hathaway sold $900 million worth of shares, a position it started building in 2005. At the Berkshire Hathaway annual meeting in 2016 Warren Buffet referred to Amazon as “a big, big force and it has already disrupted plenty of people and it will disrupt more,” He went on to say that many companies “have not figured the way to either participate in it, or to counter it.”
90% of Irish businesses are already experiencing or are about to experience disruption. Every business needs to find its own path in how it will “participate in it or counter it”. Above all, business leaders need to put plans in place and act decisively to take on the digital challenge. “I wish we had moved faster” doesn’t have to be the epitaph of once great companies.
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