A recent survey from Prosper Insight & Analytics of nearly 7,000 U.S. adults shows that 26.2% of holiday shoppers bought gifts from Amazon this year, increasing from 10% of respondents surveyed this time last year.
“Amazon.com will be the Grinch who stole Christmas from competing retailers this year,” Pam Goodfellow of Prosper Insights noted in a recent blog post.
Goodfellow said Wal-Mart Stores ranks in second place with holiday shoppers at 14.5%. Competitors like Target, Kohl’s, Best Buy, JCPenney, Toys R Us and Costco had single digit percentage shares, according to the Prosper data. She said this is the third consecutive holiday season Amazon has won the biggest share of online holiday shoppers. Goodfellow said Wal-Mart has lost share since 2013.
“Walmart has realized a 3-year compound annual growth rate (CAGR) of -13.9% to Amazon’s +15.2%. Consequently, Amazon has been steadily increasing the gap between it and Walmart, which is at nearly 12 percentage points this year,” Goodfellow notes. “It appears that Walmart still hasn’t figured out how to address the Amazon challenge.”
It should come as no surprise to see Amazon pick up online holiday share, given that an estimated 50% of U.S. households hold Amazon Prime memberships, costing a minimum of $100 annually, which gets them two-day shipping on most products. Amazon customers do overlap with Wal-Mart customers. Cowen & Co estimates that 42% of Amazon Prime members are also Wal-Mart shoppers, compared with just 20% in 2013.
Annibal Sodero, assistant professor at the University of Arkansas, said Amazon attracts shoppers to its ecosystem with subscriptions like Prime. Estimates are that 55% of online consumers search Amazon first, surpassing Google this year. U.S. shoppers spent about 30% of their online time at Amazon.com, compared to 3% at Walmart.com. He has said online there is no comparison between Amazon and Walmart.com.
However, the vast majority of retail sales this holiday season will happen in brick and mortar stores. The National Retail Federation estimates retail sales in November and December (excluding autos, gas and restaurants) will increase 3.6% to $655.8 billion. Online sales are forecast to increase between 7% and 10% over last year to as much as $117 billion.
Wal-Mart also is a retailer with more than 4,000 stores and the largest grocer in the nation with a logistics operation which could give it an advantage over companies like Amazon now attempting online grocery.
Analysts don’t expect online sales to outpace store sales any time soon. But some categories like apparel are moving in that direction. Amazon expects this year it will sell more apparel than Wal-Mart and by 2018 it will be the second largest seller of consumables such as laundry detergent and toilet paper.
Wal-Mart threw a wrench in expectations when it acquired Jet.com for $3.3 billion earlier this year. Since then Wal-Mart Stores CEO Doug McMillon said he expects online sales to grow between 20% and 30% over the next three years. Online sales grew 19% in the first half of this year, but the online business remains only a fraction of Wal-Mart’s overall $500 billion annual revenue.
Keith Anderson, vice president of strategy and insights for Profitero, told Talk Business & Politics, Wal-Mart faces plenty of challenges as it works to build market share online.
“Amazon has been at this for more than a decade and continues to invest in ancillary devices and products other than retail. But each of these add value to Amazon customers,” Anderson said.
Michael Levin, co-founder of Consumer Intelligence Research Partners, estimates Prime members spend an average of $1,100 annually with Amazon, not counting the membership fee. Non-prime members spend about $600. In contrast Wal-Mart has said it’s online-only customers spend an average of $200 annually, while store only shoppers spend $1,400. Shoppers who use both methods have an average spend of $2,500, and represent an audience Wal-Mart hopes to grow. One way that is happening is via an expansive rollout of the Walmart U.S. online grocery pickup service now in 100 markets, up from five earlier this year.
Wal-Mart spokesman Ravi Jariwala said the service receives high customer satisfaction scores, repeat rates and net promoter scores. Jariwala said it’s too early to discuss details of the retailer’s recent grocery pickup and fueling station which opened two weeks ago in Denver. The online grocery pickup combined with a fueling station has been on the drawing board for more than three years dating back to former Walmart U.S. CEO Bill Simon, who talked about the model as one of several the retailer would test.