Walmart is the biggest retailer in the world and Amazon is the world’s largest e-commerce player, but the two are increasingly moving in on each other’s territory. Currently, the two are in the race to buyout India’s e-commerce stalwart Flipkart. While odds are more in favor of Walmart bagging Flipkart- for a rumored valuation of $20 billion- the competition between the U.S.’ two retail giants are nowhere close to an ending.
Both the companies have a vast difference in their profits and their workforce. In 2017, Walmart recorded sales worth $485 billion and earned a profit of $13 billion. It employs 2.3 million people across 28 countries. On the other hand, Amazon’s revenues touched $178 billion while its profits hit $3 billion. With over half a million individuals within its workforce, the e-commerce firm is also a sizable employer.
Despite its difference in sales and staff Amazon is valued $701 billion in terms of market cap, more than double of Walmart’s market cap of $ 310 billion. This is due to the phenomenal growth that Amazon has witnessed in their sales, which have grown 25% last year and have doubled since 2014. In contrast Walmart’s revenues have grown just under a percent last year and less than 2% since 2014.
Amazon’s Moves Into Physical Retail
In 2015 Amazon diversified into physical stores after it opened Amazon Books- a chain of over 15 bookstores. The store also sells Amazon electronics like Kindle tablets, Echo smart speakers and Fire TV, a digital media player.
Last year Amazon acquired whole Foods Markets, a retailer that sells organic foods and has about 473 outlets. Food has been Walmart's biggest revenue churner, making up roughly half of the company’s revenues. The Arkansas-headquartered firm has also set up over 75 ‘Amazon Pop-Up’ and ‘Amazon Smart Home Experience’ stores that sell Amazon’s smart products.
Amazon has also opened Amazon Go, a physical store that has eliminated the need for a checkout counter. In such outlets, the customers will go to the store and pick up what they want and leave while the Amazon Go app will bill them for he groceries. Right now there is just a single Amazon Go store in Seattle Washington U.S.A., that sells mostly freshly cooked food. But the company could potentially expand to diversify their product line, or apply this technology to Whole Foods stores.
Wal-Mart’s Shift To E-commerce
U.S. retail giant is not ceding its dominance very easily. Over the last two years they acquired e-commerce platforms and brands across various verticals.
Among its acquisitions are Bonobos, a high end men’s apparel online retailer, indie and vintage-inspired women’s clothing online retailer ModCloth and Hayneedle.com, an online furniture retailer. These acquisitions will give Walmart a presence in more niche product lines that have better margins.
Walmart’s most important acquisition is Jet.com, which it acquired in 2016 for $ 3.3 billion. With this deal, the company will be in direct competition with Amazon through this target. The firm even hired Jet.com’s founder and CEO to head its e-commerce division. Walmart has also tripled the number of products that it sells helping it edge its way in the list of top 5 e-commerce player in the U.S. though it lags behind Amazon, both in terms of products sold and market share.
Even with these investments, only 3% of Walmart's total sales come from its online channels and just 2.8% of Amazon's revenues come from physical stores. Amazon has nearly 50% of the U.S. online market and is continuing to grow its market share. Meanwhile Walmart has just about 3% of the market share. Amazon is an influential player in the global e-commerce market, with a capability to deliver to 100 countries across the globe. The company recently bought the Middle East's largest e-commerce player Souq.com for over half a million dollars. In contrast Walmart does not generate significant online sales outside the U.S. though they do have a presence in 11 countries.
With over 11,700 stores Walmart has an outlet within 10 miles of 90% of the U.S. population. Amazon, even after acquiring Whole Foods, has just over 500 stores and these stores are much smaller. Walmart leases or owns 1.2 billion sq. ft. of retail space, as compared to 21,000 sq. ft. that Amazon stores cover.
With both retail giants standing strong within their respective fields, it will be a long time before either of them are able to establish themselves comfortably in the other’s turf.