Retail is not a zero sum game, but there are winners and losers to share in the $3.6 trillion retail sector. Walmart gets the nod over Amazon in terms of overall U.S. sales revenue with $319 billion in sales, ahead of the $200 billion recorded by Amazon.
In terms of profitability, Walmart also wins with $18 billion in net income for the recent fiscal year, compared to $3 billion for Amazon. Walmart has a clear advantage in brick and mortar with 4,761 stores compared to 500 Amazon locations, including Whole Foods.
But Amazon is the clear winner when comparing growth rates and market capitalization. The Bentonville retail behemoth grew sales at 3%, compared to 31% growth reported by Amazon. Also, Wall Street values Amazon’s outstanding stock at $760 billion compared to $259 billion with Walmart.
Ken Cassar, principal analyst for Slice Intelligence, recently said during a Retail Wire webinar that comparing Amazon to Walmart is like asking who is the best athlete, Olympic swimmer Michael Phelps or tennis pro Roger Federer. Cassar said as Federer might struggle swimming laps, Walmart has its challenges scaling e-commerce. Likewise, Phelps would likely be outmatched on the tennis court as Amazon is when it comes to brick and mortar.
Slice reports Amazon accounts for the majority of e-commerce growth in 2017. Cassar said Amazon controlled 54% of the total e-commerce growth last year while everyone else shared the remaining 46%.
Amazon’s growth was broad with home and kitchen (19%), electronics (15%), health & beauty (13%), apparel (9%), home improvement (9%) and toys (6%), with food and pets each growing 3% from the prior year.
He said Amazon’s gross market value of online sales was 15 times larger than Walmart in 2017. Prime memberships drive more purchases for Amazon. For the year, the average online order frequency for Amazon was 27 times, compared to just 3 times for Walmart. Cassar said there is some overlap between Amazon and Walmart customers but it’s Amazon that benefits the most. The survey by Slice indicated 72% shopped only Amazon for online orders, 19% shopped Amazon and Walmart, and just 9% shopped only Walmart.
Slice said Amazon’s supply chain network has trimmed the delivery duration from click-to-door from two days to same day in select markets. Walmart has had a tougher time providing consistent delivery durations which was as high as 7.4 days in early 2016 before being reduced to 3.2 days in the last quarter of 2017.
Cassar said Amazon is “killing it with voice commerce” over Walmart who recently partnered with Google Home. He said Google made up some ground during the holiday season via partnerships with Kohl’s and Walmart, but Amazon devices vastly outnumber those sold by Google.
Amazon also has become the place where 55% of shoppers say they begin their online product search, bypassing the Google search engine altogether. Slice estimates if Amazon’s growth continues at the current pace its gross merchandise sales value will surpass Walmart’s total U.S. sales in the next two years.
Walmart has made progress against Amazon’s dominance in the past two years with the acquisition of Jet.com. Since late 2016, Walmart has grown its online share from 4.5% to 5.8%.
Cassar said a big reason Walmart has share gains is because of online grocery expansion. In 2017, the average online order size for Walmart was $70, compared with $52 at Amazon. The majority of Amazon orders were less than $20, whereas Walmart had far more orders of $50 to $100 on average.
He said the $700 billion U.S. grocery market is nearly twice the size of the total $450 billion e-commerce market. Grocery is a clear advantage for Walmart as the nation’s largest grocery chain. In 2016, he said Walmart online grocery accounted for just 7% of the retailer’s total e-commerce sales. A year later, Walmart grocery comprised 17% of its online sales. Cassar said growth in food was the most important category shift for Walmart last year.
Slice reports Walmart had 61% of the online grocery wallet share in 2017, compared to 16% at Amazon and 23% shared by other retailers. Cassar said Walmart’s omnichannel – online, in-store, store pickup – success is also enviable to Amazon, and nearly all other retailers. He said the use of Walmart’s brick-and-mortar stores to fulfill online grocery orders which are picked up at the shopper’s convenience is something Amazon still can’t do at scale.
Carol Spieckerman, CEO of Spieckerman Retail, took part in the webinar defending Walmart as the retail leader to watch. She said consumers want choices and Walmart is best positioned to provide shoppers with in-store pickup or home delivery.
“Walmart wins here because it has more touchpoints with consumers and provides choices Amazon can’t. Food drives frequency and grocery is Walmart’s strength,” Spieckerman said.
Lee Peterson, executive vice president of strategy at WD Partners, was in Amazon’s corner defending it as the retailer with the most growth potential. He said 66 million U.S. households are Amazon Prime members, a number that grew by 35% last year.
“Amazon’s growth has been without grocery and with half of U.S. households being Prime members I see Amazon being bigger than Walmart in the next few years.” Peterson said.
Cassar said Walmart’s online sales grew faster than Amazon’s but it was a much smaller base. He said Amazon’s sales have grown at the expense of profits and Wall Street could increase profitability expectations which would favor Walmart over Amazon.
When asked which retailer has the most potential on a global scale, Spieckerman said Walmart has a clear advantage because it is a global retailer who’s not afraid to partner with frontrunners in difficult countries like China. She said Amazon has failed to scale its business in China against the likes of Alibaba and JD.com, who is now hitched with Walmart. Cassar agreed Walmart has a leg up on Amazon in the global arena.
Peterson said Walmart and Amazon could each learn from Starbucks, a company with 24,000 stores in 75 countries. Much of Starbucks’ global success is linked to forging key partnerships and respecting local cultures, he said.