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Amazon vs. Walmart: Has the Retail Narrative Shifted?

Updated: Oct 12, 2022

Amazon vs. Walmart

Despite the negative attention Amazon may have commanded in recent years, there's little room for doubt that a one-time gamble has transformed itself into a major player—not just as a pioneer in online shopping but as one of the most significant forces in the global market.

Any force, economic or otherwise, has the potential to disrupt as much as it has the potential to create. But what happens when that force has to adapt to otherwise unthinkable circumstances?

To answer that, look no further than the case of Amazon vs. Walmart.

Amazon vs. Walmart: Has the Retail Narrative Been Disrupted for Good?

Walmart vs. Amazon: who wins?

2020 may have been the year when eCommerce became an indisputable force in the retail market. But it was 2021 which was the year in which the retail narrative changed entirely—at least as far as its key players are concerned.

That narrative was by and large driven by Amazon. And it's likely going to continue to be informed by Amazon as digital retail continues to soar to unprecedented heights.

But an Amazon-centric focus comes with its own constraints, not the least of which has resulted in increasing public criticism.

As reports of Amazon exceeding Walmart in sales volume by over $40 Billion emerge, what will the retail narrative look like beyond 2021?

The Amazon Effect

It wasn't just Amazon Prime customers who were responsible for Amazon's sales boom in 2021

It's easy to say that Amazon possesses a disproportionate market share of the digital economy. It's harder to admit they're directly responsible for enabling and nurturing the growth of that same economy to begin with.

The same couldn't always be said for Walmart. Up until recently, their transition to online retail was marked by as many successes as it was failures. But Walmart has always been to brick and mortar what Amazon is to eCommerce.

Yet the gulf between digital and physical retail is a vast one, and strengths may not always translate effectively between the two. Walmart may have seen an astounding revenue growth of 74 percent in online sales during 2021's first quarter, but it barely made a dent in Amazon's armor.

And that could be as much due to the historical track record of the retailer as it is to Amazon's digital advertising strength.

Marketplaces, Advertising and the Third Party Boom

The advertising boom in eCommerce

Success in retail isn't just measured by sales alone, but by diversity. Not merely the diversity of product lines, but in brand visibility.

While the reported decline in traditional advertising by 15.7 percent in 2020 dealt a significant blow to marketing, it's not simply the pandemic which fueled its downfall.

Marketing was facing a gradual decline well before 2020, owing as much to changes in shopping habits and priorities as it has in declining consumer trust. And it's a downturn which both Amazon and their third-party marketplace have used to their advantage.

Amazon's advertising sales saw a massive growth rate of 87 percent during Q2 of 2021, even despite predictions that loosened pandemic restrictions would result in a sharp increase in brick and mortar retail. And physical retail sales have increased during Q2—by almost 15 percent from the previous quarter.

But if there's anything about the shift in consumer habits that 2020 has taught the retail sector, it's that customers are just as concerned with choice and convenience as they are with the physical shopping experience. An estimated 68 percent of shoppers have indicated that same day delivery is a decisive factor in choosing to make an online purchase.

Yet that increase can come at a cost. The strain on global supply chains is currently at a critical mass, leaving many third-party sellers with increasingly limited options for cost-effective delivery—particularly at a time in which consumers have come to demand free two day shipping thanks to the popularity of Amazon Prime.

Walmart: The Advantages and Disadvantages for Sellers
Free access at a Walmart storefront

While Walmart has successfully attempted to make some headway into the third-party marketplace, sellers still can face certain limitations. Not the least of which is Walmart's chief consumer value: price advantage.

Walmart prioritizes product listings by the lowest price, leaving many sellers struggling to maintain their ground—frequently at the cost of their own product margin. Nor is price necessarily the chief concern of online shoppers.

Both online shopping and big box stores may be predicated on convenience. But online shoppers tend to be concerned with both quality and product diversity over prices. Amazon Prime members don't just subscribe to the service for a discount, but for Prime exclusive offers.

This isn't to suggest that price isn't a contributing factor in eCommerce. But there's more to online shopping than mere affordability. And for Walmart, affordability has always been its guiding light.

Walmarting, EDLP and the Digital Economy
Store sale

Walmart may have consistently strived to cultivate a customer friendly image by providing a one stop shop appealing to budget conscious families. But what has proven to be a successful image over the past six decades can be a challenge in the digital realm.

Much of the criticism leveled against Amazon is also applicable to Walmart. Namely, that the presence of both enables a monopolization of the marketplace, giving both retailers an unfair advantage based on disproportionate shares.

It's a criticism Walmart knows far too well; resulting in the term “Walmarting”; a process in which smaller retailers are pushed out by both expansion, acquisition and Walmart's own discount pricing strategy, reflected in the popular marketing model of EDLP (“Everyday Low Pricing.”)

Yet digital real estate differs from physical real estate in a particularly unique way: demographic representation. Both Walmart and Amazon are one-stop shops. But their demographics diverge wildly.

Amazon has yet to conquer physical retail. And as Gen Z's projected $360 Billion spending power is poised to become the most considerable factor in continued retail survival, businesses will need to adapt to their spending habits. But if Walmart's market share in eCommerce continues to grow, it will be largely because of their omni channel strength.

Amazon vs Walmart: A Tale of Two Retail Giants

Can Walmart and Amazon support one another?

But the vast majority of Walmart's sales primarily came from their own inventory, not from third-party sellers—who currently number a little over 100,000 compared to Amazon's 6.3 million strong market.

While the share for both marketplaces is growing more competitive by the day, the amount of non-grocery products available online from Walmart actually shrunk from 50 million to 36 million in 2020 in spite of increasing third-party presence—a number which can be attributed to Walmart's stringent vetting process. In comparison, only 45 percent of Amazon's sales in Q1 2021 came from their own inventory in 2021.

Walmart's continued investment in eCommerce isn't going to be quelled anytime soon. They've already earmarked $14 Billion for the fiscal year 2022 to improve existing operational infrastructure, with much of that being devoted to improving online presence and fulfillment.

However, much of that budget is likely to be allocated to grocery delivery. And despite their acquisition of Whole Foods Market and the increasing success of Amazon Fresh, grocery stores and delivery isn't likely to be a predominant focus for Amazon's expansion anytime soon.

Innovation: Who Has the Greater Advantage?

Innovation in technology is the cornerstone of e commerce

But there's one critical component which separates digital commerce from its physical counterpart: innovation. Low prices simply aren't enough in the online commerce market. What drove consumer interest in eCommerce long before the pandemic will continue to drive it in 2022: product diversity, accessibility, service and availability.

There may be a Walmart store on virtually every street corner, and that's not likely to change anytime soon. The historical performance of Walmart stock practically guarantees it. But neither physical visibility nor stock performance are the same as retail innovation. Walmart's track record proves they have mastered the former. But can they achieve the latter?

Millions of unconverted customers may be counting on it.


Color More Lines knows both the strengths and weaknesses of Amazon as well as Walmart. Find out more at Color More Lines.

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