Private equity firm Apollo Global Management will take Rackspace private in the all-cash deal.
A rumored Amazon-Wal-Mart deal wouldn’t hold enough benefit for either party, observers say.
The rumor mill is abuzz with talk of Amazon.com and Wal-Mart joining forces. And while both companies will not confirm or deny such rumors, one analyst says talks of Amazon partnerships are to be expected, but a venture with Wal-Mart is not.
Ultimately Amazon is the wrong platform for Wal-Mart, says Duif Calvin, vice president in global retail practice for iXL. Amazon’s format is great for selling one item at a time, but not for up selling, cross selling or selling items in groups, she says. “Wal-Mart is brilliant at merchandising,” she says. “They are the people who put bananas in the cereal aisles. People shopping Walmart.com want to see things grouped together the way the see them in the stores.”
However, because of the success Toysrus.com had in using Amazon to run its web site and fulfill its orders, every major retailer has to be looking at Amazon to see if there is a fit, she says. For Wal-Mart, that fit would be partnering with a fulfillment expert. Such a partnership would make sense for Wal-Mart “because it would let them get out of the business they are not in and stay in the business they are in,” she says.
But a fulfillment arrangement would also have its pitfalls, she adds. Toys R Us could not accept in-store returns from online purchases because Amazon did not want to get into the issue of charging sales tax, she says. “It’s hard to believe Wal-Mart would tell customers they cannot return online purchases at a brick-and-mortar store,” she says. This, she says, is because much of Wal-Mart’s strength is in the relationships it builds with customers.
And speaking of Toys R Us, it is the second largest toy seller behind Wal-Mart. Issues will likely arise if Amazon partners with both, Calvin says. Toysrus.com was unavailable for comment.