By, Joshua Barzola
If you were to compare the market capitalizations of Walmart and Amazon, you would notice Walmart is roughly one third of the size of its competitor. This seemingly depicts Walmart as the underdog trying to compete with the Goliath, but on the contrary, these are heavyweight champions fighting to gain consumers’ hard earned dollars.
Walmart has been in the game 30 years longer than Amazon, yet through consumer focus and satisfaction, large investments in logistics/supply chain, and digital growth, the company has built a dominant presence to rival Walmart. The question is, how does Walmart compete with Amazon as they continue to dominate the online retail industry? Does the heavy loaded in-store retailer rely far too heavily on brick and mortar? What types of innovations and development has Walmart taken to battle their online rival?
For decades Walmart grew physical locations just about everywhere in the world. In 2018, Walmart was estimated to have 2.2 million employees around the world. What gives Walmart a competitive advantage over Amazon is their ability to attract consumers with the convenience to buy products such as groceries in store. Brick and mortar’s convenience benefits Walmart in this sense, as 90% of Americans live within 10 miles of a Walmart store, where it earned US$270 billion dollars in groceries sales compared to the US$20 billion Amazon generated.
In terms of total retail sales, e-commerce sales have dramatically increased since 2007 from 5.1 percent to 13 percent and growing in 2017. Just from 2016-2017 sales, e-commerce rose 16 percent proving how rapidly that part of the industry is growing. In-store purchases in 2017 accounts for 85.0% of total retail sales in the U.S, which shows how important their 11,000 plus stores around the globe generate them massive sales revenue. In Q2, U.S store sales were up by 7.3% over a two-year period which shows Walmart’s continued success attracting consumers to their brick and mortar stores even with the rapid growth of e-commerce. In comparison, Amazon’s acquisition of Whole Foods and opening of Amazon Go are just several ways the company hopes to tap into Walmart’s dominance through brick and mortar.
One of the main reasons Walmart’s stock price has increased dramatically over the years is due to the fact that they are unsatisfied with dominating just brick and mortar sales. Their management has identified their flaws in e-commerce and have since created a popular platform that attracts a multitude of consumers, especially during this holiday season (not a plug). Investors should also note the smaller acquisitions that Walmart has purchased in order to compete with Amazon digitally. Purchases of digitally focused retailers like Jet.com and Bonobos will give Walmart the ability to further their e-commerce platform and start competing further with Amazon’s massive online presence. Walmart also owns 80% of Flipkart, which is one of India’s largest ecommerce sites, allowing them to expand digitally in other markets across the globe.
The heavyweight match will continue as Walmart tries to grow their e-commerce platform faster than Amazon tries to grow their brick and mortar presence. The technological advances nearly match that of Amazon, as Walmart implements ways to automate the cashier as well as creating online pickup kiosks without interacting with a single person. Ultimately, the winners are the consumers as the more companies invest capital to compete with one another, the far greater products and services they provide to the customer.
Featured image by Hanson Lu.