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Can Amazon’s Growth Defeat Walmart?

Updated: Jan 31, 2023


Is Amazon playing strategically with America's largest retailer?

2021 may have been a landmark year for Amazon, and subsequently for eCommerce as a whole. But even given its upward trajectory, eCommerce itself remains only 14 percent of total retail sales in the US.


While their entry into segments as unexpected as logistics and advertising may prove to have a much more critical impact than many of us can imagine, the key to understanding Amazon's growth is its very heart: retail disruption.


A disruption that may overtake the status of one of America's most well-known and largest retailers.


Amazon vs Walmart: Predictions and Profits

Net income and innovation sales in eCommerce

Despite the threat that eCommerce may seem to pose to brick-and-mortar, physical shopping is far from dead.


Walmart's an excellent case in point. With earnings of over $559 Billion in 2020, their sales easily overshadowed Amazon's net sales revenue of $386.1 Billion.


But longevity isn't always the same as innovation. While the Arkansas giant may have a 32-year lead over Amazon, its market share growth during 2020 was only 0.6 percent. In comparison, Amazon's share of the total US retail market was at 9.2 percent, representing revenue growth of 2.4 percent from just one year earlier and nearly tying Walmart's 9.5 percent advantage.


Recent data from S&P has estimated Amazon's revenue will more than double by 2025, exceeding $821 Billion by 2025, while other sources indicate Walmart's growth will only represent a 3.9 CAGR by that same year, to a total of $523.3 billion.


Neither is hardly negligible numbers. But numbers are one thing. Is Amazon finally beating Walmart at its own game?


Amazon, Marketplace Loyalty, and the New Retail Model

Leveraging a customer's loyalty in brick and mortar

Customer loyalty is as relevant to marketplaces as it is to brands. But Amazon's dominance in eCommerce isn't necessarily driven by market positioning or name recognition alone. It's driven by its customer base; a base which is increasingly demanding both innovation and personalization in their shopping experience.


But innovation either disrupts existing business models by its very nature—or fails altogether. And not every consumer will be susceptible to change. Both differentiation and recognition of marketplace opportunities are the foundation Amazon built upon.


Prior to Amazon's emergence, digital commerce was practically non-existent. Seizing on an otherwise unexplored opportunity, Amazon developed a customer-focused platform that revolutionized traditional retail models. Customers listened. They examined. And they wound up buying.


Loyalty programs may have already been in place prior to Amazon introducing Prime in 2005, but few saw the 33 percent growth it experienced between 2019 and 2020. While Walmart recently introduced its own subscription-based service, it has yet to become a household name—despite a first-quarter increase in online sales of 74 percent for 2021.


Customers are just as likely to maintain the same level of loyalty to physical retailers as they are to digital counterparts. Historically, Amazon's physical services and shopping hubs have nowhere matched the amount of sales volume Walmart enjoys.


But digital acceptance in the US retail marketplace surged dramatically during the first three months of 2020 by a growth rate of nearly 35 percent; a spike many analysts predict there may be no turning back from. What does this mean for Walmart?


Walmart: The Perils of Brick and Mortar in a Digital World

Walmart aisles

Since its founding, Walmart's greatest strength has always been its bottom line: consumer price advantage. And that advantage has lent itself to a near fairytale success story, from its mythic beginnings as a five-and-dime store to its current status as the largest global retailer operating over 11,000 locations worldwide.


But not every fairytale success story will translate well to the digital realm, including Walmart. While their advantage may have been historically low prices, its key demographics have tended to skew towards females between the ages of 45 - 54; neither slow adopters of eCommerce nor necessarily lacking in spending power, but effectively belonging to the last generation born prior to the digital explosion.


They're also a demographic which have historically been more apt to shop in-store, retaining a fierce loyalty towards preferred brands and purchasing habits.


Walmart's branding has only helped cultivate that appeal, portraying itself as a relatively “hometown” entity with a demeanor that borders on the downright folksy. But can that image survive in the decidedly global world of digital commerce?


Not necessarily. Walmart's forays into eCommerce have been studded by just as many failures as it has successes. Nor has Amazon's history been a unilateral success.


But in order to compete with Amazon's global reach, Walmart will have to innovate to survive—a factor they've historically been unable to reproduce at the same scale as Amazon.


What Challenges Does Walmart Have to Face?
A sign of the times for brick and mortar

Success in eCommerce can be as much a question of breaking the mold as much as developing an entirely new one. And the ultimate value for both brands and marketplaces isn't necessarily a question of price advantage. It's a question of differentiation.


As consumers adopt the new digital retail landscape at a breathless pace, the need for distinction is critical if brands have any hope of competing. A company that fails to adapt to changing consumer needs will likely find itself to be an afterthought, at best.


To be fair to Walmart, they've excelled in areas that other businesses are just now catching up to, including eCommerce solutions and logistics. But at their core, they've always been defined by both convenience and price advantage. Can they innovate in 2023 and beyond without sacrificing either?


Walmart may have dominated brick-and-mortar retail over the past 63 years. But 2022 is not 1962. And the chances of 2025 rolling back to 1962 aren’t likely for Walmart, either.

 

For all the up-to-date news in eCommerce, visit us at Color More Lines.


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