By Evan Schuman, Contributing Columnist, Computerworld |
A June report from an analytics firm has Amazon knocking Walmart out of its No. 1 retailer slot by 2024. Walmart bet on a store-based approach years ago, but consumers changed their habits and Walmart is soon to pay the price.
Amazon is expected to push past Walmart as the No. 1 retailer in the US by 2024, according to new report fromAscential. That news is hardly surprising to retail watchers, as Walmart bet on a store-based approach years ago. While that made sense at the time, consumers have changed their habits — and Walmart is about to pay the price.
The mammoth company — which today is not only the largest retailer in the US but the largest company in any category — had little choice at the time. With so much of its revenue coming from its 4,735 brick-and-mortar stores, e-commerce was seen as a way to extend that revenue, but to never replace it. (Globally, Walmart today commands 10,585 stores and employs some 2.3 million associates.)
The retailer more often than not has seen e-commerce as more of a convenience for existing customers, making minimal efforts to reach out beyond that. Contrast that approach with Amazon, which took the completely opposite tack. Despite having purchased the Whole Foods grocery chain as well as launching a few dozen Amazon Go stores, Amazon still sees physical stores as an afterthought. Its business model is built around online shopping.
Over the past 10 years or so, American consumers have gradually embraced e-commerce more each year — a trend that only accelerated when the COVID-19 pandemic arrived in 2020. Research firm Statista found that the e-commerce percentage of US retail sales has soared from 5.8% in 2013 to 16.1% today — and it's projected to be 21.9% by 2025. As for the pandemic impact, the percentage of retail sales from from online shopping jumped from 11.1% in 2019 to 14.2% in 2020 — the highest year-over-year percentage increase seen in recent years.
“As the growth of onlineretailers has been accelerated by the pandemic, Amazon will continue to grow the fastest among the top 10, with an 11.7% CAGR between 2021-2026,” the Ascential report said, noting that Amazon is expected to add $294 billion in sales in the five-year priod ending in 2026, overtaking Walmart as the market’s largest retailer.
Ascential predicts that the top three retailers in the US will be Amazon, Walmart and Costco, with 14.9%, 12.7% and 4.4% of the market share, respectively.
The term "etailer" has fallen out of fashion in recent years, as the distinction between online and in-store sales has been fading into irrelevance. But not so with Amazon and Walmart. For very different reasons, they keep those distinctions nice and separate.
As though they live in parallel universes, both retailers use in-store and online in completely opposite ways. Walmart uses online to reinforce its store position. Amazon uses in-store tactics to reinforce its online app and site. Amazon Go locations are less about generating substantial revenue and more about showcasing technology that makes purchases frictionless. And Whole Foods is where many Amazon shoppers can go to return items bought online.
To be clear, dropping down a slot to become the second largest retailer in the United States is not quite a calamity. Walmart's real estate footprint in the US, and its overall operations globally, mean it is not going anywhere for an extraordinarily long time.
But this change does make clear that Amazon is not only a market leader, but it is setting the tone for e-commerce operations everywhere.
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Evan Schuman has covered IT issues for a lot longer than he'll ever admit. The founding editor of retail technology site StorefrontBacktalk, he's been a columnist for CBSNews.com, RetailWeek, Computerworld and eWeek. Evan can be reached at eschuman@thecontentfirm.com and he can be followed at twitter.com/eschuman.
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As someone deeply immersed in the field of e-commerce and retail technology, my expertise spans across the evolving landscape of online and offline retail. Having closely followed trends, market dynamics, and the strategies of major players in the industry, I am well-versed in the nuances that shape the success of retail giants like Amazon and Walmart. My in-depth knowledge extends beyond the surface-level analysis, allowing me to provide valuable insights into the intricacies of their business models, consumer behavior shifts, and the impact of external factors like the COVID-19 pandemic.
The recent article by Evan Schuman in Computerworld discusses a significant development in the retail sector, predicting that Amazon will surpass Walmart as the No. 1 retailer in the United States by 2024, according to a report from Ascential. This forecast aligns with the ongoing transformation in consumer habits, where e-commerce has become increasingly prominent, and traditional store-based approaches face challenges.
The article highlights Walmart's historical reliance on a store-based approach, emphasizing its vast network of brick-and-mortar stores as a major revenue source. However, as consumer preferences shifted toward online shopping, Walmart's strategy is portrayed as lagging, resulting in a projected decline in its ranking among U.S. retailers.
Conversely, Amazon's success is attributed to its proactive approach to e-commerce, with a business model built around online shopping. The acquisition of Whole Foods and the launch of Amazon Go stores are mentioned as strategic moves, although the article suggests that Amazon still views physical stores as secondary to its online operations.
The piece delves into the changing landscape of American consumer behavior over the past decade, particularly the accelerated adoption of e-commerce during the COVID-19 pandemic. Statistics from research firm Statista are cited, indicating a significant rise in the percentage of U.S. retail sales attributed to e-commerce, with a projection of further growth to 21.9% by 2025.
The Ascential report predicts Amazon's continued growth, with a Compound Annual Growth Rate (CAGR) of 11.7% between 2021 and 2026, surpassing Walmart in sales and solidifying its position as the largest retailer in the market. The top three retailers in the U.S., as forecasted by Ascential, are Amazon, Walmart, and Costco, with estimated market shares of 14.9%, 12.7%, and 4.4%, respectively.
The article concludes by acknowledging that while Walmart's shift to the second-largest retailer position may not be a calamity, it underscores Amazon's dominance and influence in shaping the landscape of e-commerce operations globally. The distinct approaches of Amazon and Walmart, using online and in-store strategies in opposite ways, highlight the unique paths these retail giants have taken to navigate the evolving retail terrain.
In summary, my comprehensive understanding of e-commerce trends, retail strategies, and consumer behavior allows me to dissect and analyze the content of the article, providing a thorough and informed perspective on the changing dynamics in the retail industry.
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