Walmart remains the largest U.S. retailer, Amazon a distant second

by Kim Souza (ksouza@talkbusiness.net) 1,788 views 

Walmart often is seen as losing out to Amazon, especially in terms of share price and broad subscriber base. But there’s one metric where Walmart still commands a large lead over Amazon — sales revenue. A recent STORES Magazine Top Retailers list put Walmart in the No. 1 spot with $387.66 billion in annual U.S. sales and 5,263 stores.

Amazon, with some 100 million Prime subscribers, ranks second with revenue totaling $120.93 billion, and roughly 490 stores in the U.S., most of which are Amazon’s Whole Foods locations. Kantar, which compiled the report, notes Amazon is easily the most disruptive and influential force in the U.S. retail industry, but it’s still nowhere in Walmart’s league when it comes to store locations and sales revenue.

Kantar estimates brick-and-mortar still accounts for about 90% of total retail sales in the U.S., but e-commerce is growing at a much faster clip as many categories such as apparel and pet products have already shifted toward much larger online sales. While Amazon is believed to be most disruptive to the growth of Walmart.com sales for general merchandise, the explosion of online grocery is being led by Walmart through its online pickup service, which is now available in more than 2,500 store locations. Walmart is rolling the program out to 100 stores each week through the rest of the year, with a final goal of 3,300 stores offering the service.

Keith Anderson, senior executive over strategy and insight at Profitero, told Talk Business & Politics Walmart’s use of its store infrastructure to bring grocery shopping options to the masses is just one of the things the retail giant is doing right. He said Walmart’s cold supply chain is a huge asset it can leverage to try and stay ahead in online grocery.

A harder task for Walmart is how to grow non-grocery online sales. He said Amazon is the clear leader in marketplace sales – smaller retailers using Amazon’s platform – and under the guidelines of Walmart’s invitation-only policy it doesn’t look like Walmart.com will mount a significant threat to Amazon. Anderson said there does not have to be just one winner in online retail. He gives Walmart props for investing heavily and continually testing and trying to move the needle as consumers want convenience shopping options.

Kantar said its TOP 100 Retailer list hasn’t changed much in recent years in the first 10 spots, despite disruption in retail. One of the more interesting areas in retail is the non-tangible services retailers are selling. Amazon has a big lead in this area with electronics books, music, videos and television programming all of which are included with the $119 per year Prime membership that also includes 2-day free-shipping on millions of items sold on Amazon.com.

“If I am providing a service and only service, I am an intermediary,” said Dave Marcotte, senior vice president of cross-industry, cross border and technology at Kantar, who believes the definition of a retailer is being unnecessarily broadened in some circles. “The markup on merchandise is typically 20% to 25%, while on services it’s more like 40-50%. If I’m in retail, I might want to go where I’m going to make money.”

Marcotte said retailers are also doing more store remodels in lieu of opening new locations. He said remodels often allow for more services to be offered for consumers. Walmart is remodeling 500 stores this year with pick-up towers added in many stores to facilitate online orders of general merchandise as well as moving pickup locations from the back of stores to the front with a sitting area and easy check-in via mobile phone. Walmart is testing electronic shelf labels, robotics floor cleaners and robots to scan the inventory for out-of-stocks. More self-checkouts continue to take the place of manned stations, and the retailer is adding brighter LED lights in stores and creating wider aisles as well.

Marcotte said three or four years ago Walmart was seen as chasing Amazon, but the Bentonville-based retailer now appears more confident in what’s it’s doing and comfortable as the alternative in some areas.

Amazon continues moving in several directions at once. A new supermarket concept outside of Whole Foods is being planned in the Los Angeles area. Amazon is growing its marketplace vendors and cutting back on direct sales to consumers so that it can focus on other areas. Marketplace sales now account for up to 58% of the retail sales on Amazon’s website, up from about 30% just 10 years ago. Because Amazon is not carrying as much inventory of its own, it’s able to cut expenses. Amazon also charges a few from marketplace sellers which is a revenue stream for Amazon without the risks of holding non-selling inventory. The majority of Amazon’s profit comes from web services, cloud computing and advertising.

KROGER & COSTCO
Kroger ranked third again this year on the STORES list and it is a competitor Walmart faces in many markets across the country. The Cincinnati-based traditional supermarket operator had sales revenue of $119.7 billion last year. The retailer operates 3,035 stores across the country and also is investing in online grocery. Kroger invested $250 million in Ocado last year to run automated warehouses and manage online grocery sales.

Kroger, like Walmart, is experimenting with driverless technology for online grocery delivery and works with Instacart delivery in about 1,600 locations. The retailer also uses electronic shelf labels and is growing its curbside grocery pickup business as well.

Costco is also a respected brand and it ranked fourth in terms of U.S. sales revenue last year at $101.43 billion. Costco is more aligned with Walmart-owned Sam’s Club than traditional retail. Costco has built a loyal following with private brands and continues to see some of the strongest foot traffic in the industry. Costco has been slower to adopt e-commerce because in part its members love to visit clubs and shop in person, according to Richard Galanti, chief financial officer at Costco.

PHARMACY, HOME IMPROVEMENT
The STORES list pegged Walgreens and CVS as the fifth and seventh largest retailers, respectively, on the Top 100 chart this year. The retailers are focused on increasing the speed of prescription home deliveries and find themselves also competing with Amazon who acquired PillPack, an online pharmacy about a year ago. PillPack sorts packages and delivers medications to homes. Amazon offered its Prime members monthly deliveries of prescriptions to treat chronic conditions such as high blood pressure and diabetes.

In response, CVS launched a delivery service where 80% of medications are delivered the next day, the rest within two-days. Walgreens joined with FedEx last December to initiate Express next-day delivery service, and CVS raised the bar by offering same-day deliveries of prescriptions — and much front-end merchandise — via Shipt for a $7.99 service charge, with next-day or two-day delivery for $4.99.

Walgreens had retail sales of $98.39 billion and 9,451 locations. At No. 7, CVS posted retail sales of $83.79 billion, with 9,954 store locations.

REST OF THE TOP 10
At No. 6, Home Depot took a hit to start 2019 when wet weather put a damper on building projects. The retailer still has high hopes for this year based on strong consumer spending and an improving housing market, according to Carol Tomé, chief financial officer, who will be retiring in August after 24 years with the company. Home Depot U.S. sales last year totaled $97.27 million, with roughly 1,970 stores.

Target, ranked eighth, is in the sixth year of its drive to open smaller footprint stores without eliminating any of the departments found in its larger units. The company is looking to open 30 of the locations this year in urban markets. The company is redesigning 1,000 stores by the end of next year. The remodels will have a grab and go Snack bar area with a self-service checkout. Target had retail sales of $74.48 billion last year, with 1,844 store locations.

At No. 9, Lowe’s is benefitting from new CEO Marvin Ellison, who took over the reins after leaving J.C. Penney last summer. His next moves are aimed at raising sales and productivity per square foot, and the efforts are being noticed on Wall Street. Lowe’s posted retail sales of $64.09 billion last year, with 1,723 stores.

Rounding out the Top 10 is grocery conglomerate Albertsons, which is using technology to improve the customer experience. The company is using Microsoft cloud capabilities to shorten waiting times at butcher and deli counters, at checkout and even outside the store at the gas pumps. AI is used to anticipate out-of-stock situations and detect items misplaced on shelves. Albertsons has also unveiled its prototype “next generation” store near its Boise, Idaho, headquarters. Albertsons posted retail sales of $59.71 billion last year, with 2,249 retail locations.

Following are other retailers in the top 25.

No.11 Apple Store/ iTunes – $47.27 billion
No 12 Royal Ahold Delhaize US – $43.80 billion
No. 13 Best Buy – $39.19 billion
No. 14 McDonald’s – $38.53 billion
No. 15 Publix Super Market – $36.52 billion
No. 16 TJX Companies – $29.59 billion
No. 17 ALDI – $28.78 billion
No. 18 Dollar General -$25.63 billion
No. 19 Macy’s – $24.90 billion
No. 20 H.E. Butt Grocery – $24.02 billion
No. 21 Dollar Tree – $22.48 billion
No. 22 Verizon Wireless – $22.26 billion
No. 23 Kohl’s – $19.17 billion
No. 24 Yum! Brands – $18.63 billion
No. 25 Meijer – $17.69 billion

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