Which is the Better Retailer? Walmart vs. Amazon
The first in a series comparing leading retailers — how they’re doing, and what the future may hold.
When looking at retail heavyweights, you don’t have to look further than Walmart and Amazon to find the most successful. Walmart’s sheer size, in terms of revenue, is greater than its four largest competitors. It dwarfs all big box competition in terms of number of physical stores and square footage. Over the years, it has leveraged its buying power to keep prices low and has communicated that to consumers. And, according to Walmart’s 2013 annual report, it plans to build between 220 and 240 new stores this year, adding 15 to 17 million square feet of new space.
Over the past 19 years, Amazon.com has built an online retail juggernaut of its own, having the most popular retail website, and building a reputation for reasonable prices and top-notch customer service and delivery options.
On the surface, it would be easy to say that Walmart’s future is hitched to brick and mortar retailing while Amazon’s is dependent on e-tailing. If that’s the case, Walmart has the edge for now, because, as the July issue of Stores magazine (published by NRF) notes, "… more than 15 years into the dot-com revolution, online transactions account for less than 15 percent of total retail sales."
But, according to Internet Retailer, Amazon has over fifteen percent of all e-commerce business and 28 percent of sales from the top 500 e-commerce retailers. Stores cites Amazon’s initiatives, and it has many: building new warehouses; developing new electronics devices and content; continually developing its Marketplace network of merchants; and upgrading its Web Services business. Amazon also launched a senior-oriented drug site, purchased the Goodreads book reviewing site, has numerous content deals, is expanding AmazonFresh delivery service, and continues to build on the success of Amazon Prime service. It recently launched a fine art site and Jeff Bezos recently purchased The Washington Post, which may bring some possible synergies, especially in the content area.
While Amazon seems to have an unending stream of development underway, Walmart already has the biggest foundation in the history of retailing already built. Walmart’s base is delivering consumer products at low prices and it launched an ad campaign (with an accompanying PR website: www.therealwalmart.com) earlier this year, showcasing real employees and real customers who like working and enjoy shopping there, respectively. Walmart cites the fact that over 60 percent of Americans shop there in a given month. Various initiatives include smaller sized stores (Walmart Neighborhood Markets and Walmart Express), geographical expansion, sustainability and green programs, and expansion of e-commerce via walmart.com and @Walmart Labs. Finally, there is the fact that Walmart makes money, and a lot of it, while Amazon had negative net income for the past year at least.
- Top 100 Retailers – Stores
- Will Consumers, Hourly Associates Buy ‘The Real Walmart’? – RetailWire
- New Ad Campaign Promotes ‘The Real Walmart’ – Forbes
- The Real Walmart – Walmart
- Annual Report – Walmart
- Walmart is still bad for the planet – Boulder Weekly
- 3 Signs Walmart’s Best Days Are Behind It – Breakout/Yahoo! Finance
- Jeff Bezos: Amazon.com’s ‘dread pirate’ founder – The Guardian
- Annual Reports and Proxies – Amazon.com
- The World’s Most Powerful Brands – Forbes
Discussion Questions
What do you see as the current strengths and weaknesses of Walmart and Amazon, respectively? Do you see a brighter future for Walmart or Amazon?
This is a trickier question than it seems on the surface. The company with more obvious revenue upside is Amazon. But the company seems to struggle a bit with its bottom line.
Still, Walmart seems to have to fight for every new location since its obvious small town market is saturated. Amazon just has to be there and keep doing what it does best: innovate, provide great customer service, and keep prices close. Plus, Amazon can continue to diversify and expand into different countries. Walmart, not so much.
So maybe it’s not that tough a question after all—Amazon’s future is so bright it’s gotta wear shades.
Jeff Bezos makes Amazon the winner in this head-to-head battle. He continually pushes to innovate while keeping the customer at the center of everything. Amazon has led the way with several new technologies, smart acquisitions, and ingenious marketing. Recommendations, Prime, AWS, and Kindle have changed the market.
Walmart’s focus has been in the backoffice, squeezing the supply chain and streamlining processes in order to offer the lowest price. Their actions make a major contribution to keeping inflation in the US at bay. Walmart Labs has the potential to impact the customer experience, but its still too soon to tell.
Amazon has lots of room to grow, while Walmart has to be concerned about over-saturation, unions, and small-business backlash. Both are powerful brands that won’t soon disappear.
Amazon benefits from me not ever having to drive to a store, poke around, and then bring something home. While Walmart has convenient brick and mortar locations, we must negotiate empty shelves, out-of-stocks (despite their web site saying it is in stock), and a constant reminder we do not live far from Tobacco Road. Amazon definitely has the brighter future.
Walmart’s greatest strengths are its aggressive merchandising of low prices, its giant size and its powerful supply chain. Its weakness centers on its dull stores where only “low price” is king. But, WM, being the monster of the retail runway, could have less appeal to future generations. Remember when A&P was in a similar situation?
Amazon is the innovator, the explorer, the horizon widener. Its weaknesses are not yet known to me.
As to the future, I’ll bet on Amazon.
Amazon understands value, and their customer experience is far and away above Walmart, which is bad at best. The obvious choice for the future is Amazon.
Walmart is CORE retail—meaning they provide the basics that common families need to survive. Amazon is retail, yes, but also a pre-shopping service site and also is outside of CORE retail. Their target markets are close, but far. Meaning there is overlap and room for both of them.
When I need something ASAP at a good price, I head for the Mart. When I want to get something, but do not need it right away, I go to the “Zon.”
They both have a bright future waiting for them and will help the markets that they serve “live better.”
If a diverse portfolio minimizes risk and offers more potential gains, Amazon leads Walmart. At some point the financial wizards have to step in to shore up the overall business model for Amazon’s long term profitability. But in this fast paced technology driven marketplace I’ll bet on Amazon’s visionary path.
Amazon by far has the brighter future. But the answer, no matter which we select, does not mean the other has less of a bright future. Amazon has more of an upside because Walmart seems to always have a legal battle when deciding where they will build next. I think the latest battle was in the D.C. area, but then again, everyone has a battle in the D.C. area, don’t they?
While Amazon’s future vs. Walmart appears brighter; they will begin to face stiffer and stronger competition within their e-commerce rivals.
I am seeing loads of Amazon love. You are a family running at the NA average income. Do you do your shopping with Amazon or Walmart? Let’s remember, the basics of life and family are the focus of Walmart. Thus, as the world changes, Walmart will prosper.
Do not be fooled by bright lights, spaces that sell high value art and parts for old cars or buying newspapers companies.
Walmart — the real light.
– Tom (Proud Walmart Shopper)
Walmart strengths: Footprint in U.S. and expansion overseas, profitable business model, Brick & Mortar as well as online presence.
Walmart weaknesses: Maintenance of current Brick & Mortar, most growth is tied to opening physical stores, potential backlash from consumers (labor and sourcing), poor customer service.
Amazon strengths: Customer service, convenience, reliability, services (Prime), assortment and potential growth in U.S. and globally.
Amazon weaknesses: Bottom line struggles, competitive threats (Walmart.com or something not yet created).
No question Walmart has been a huge success. What I do question is if they have more in the tank to really grow at levels that will impress the market and consumers. Amazon is just scratching the service of their potential growth.
My money is on Amazon for future potential.
While there is much to admire about both firms, and areas for improvement. At this point, Walmart is way ahead of Amazon.
1. Walmart is the largest company in the US, and consistently profitable, while Amazon isn’t profitable.
2. Walmart is getting better at digital much faster than Amazon is getting physical.
The channels are simply going away. Soon 100% of all transactions will be digitally influenced, but in our lifetime the majority of transactions will still be consummated at a physical touchpoint. In that world, more shoppers are likely to consume Amazon digital content and then buy at a Walmart touchpoint, than shoppers are to visit a Walmart touchpoint while buying from Amazon.
All that said, there are a number of inflection points on the horizon. Both companies are very capable, but as history has clearly shown us, either one of these fast runners could miss the next pivot, and become a footnote in history.
This is THE appropriate comparison at retail, and I endorsed every view here, even though they don’t all agree. Is schizophrenia a feature or a bug? 😉 Anyway, I have been focussing on exactly this issue since at least 2007 when my major presentation was titled “The Amazonification of Walmart.” One of my earlier efforts to come to grips with what Amazon has to offer Walmart was “The Amazonian Ghost.“
Walmart is clearly the world’s premier logistics organization; while Amazon is the world’s premier “selling” organization. (Explaining that is too long for here.) But it’s also true that Amazon is no slouch on logistics—basically what self-service retail has been about for 100 years—and knows a great deal more about logistics than Walmart does about selling.
Here is the shocking thing about Walmart’s sheer size: size can become an inertial liability in a cage match between two salesmen. However, both of these companies have a great future, given the size of the world and the coming explosion of retail growth as the developing world—at all levels—moves into the middle class, and the middle class, everywhere except where there is suppressive government, will move further into the upper economic levels. An exploding energy sector and a flushing of green economics will guarantee it! (However, prosperity will drive continuing progress on the “clean” front.)
“… Its weaknesses are not yet known to me.”
Gene Hoffman
Might Diogenes have finally found his honest man???
Gene’s words are wise counsel to all those singing the praises of Amazon. Not that I think Amazon is in danger of tumbling into some unknown abyss any time soon, mind you.
But in evaluating Al’s scenario, it seems what we have not discussed is that we are really evaluating the difference between two business/delivery systems.
Walmart is a brick and mortar business with both physical (in store) and online order interfaces.
Amazon is a home delivery business with online order interface only.
Online order interfaces are not proprietary. Amazon’s current dominance of that facility notwithstanding, every other retailer has access to that order interface regardless of their business (delivery) system.
So, I submit that the real discussion here will boil down to the relative advantages of home delivery over “in-store pick up” (regardless of how you place your order. You have to give Walmart a running head start on that one. BUT, if Amazon can find a way to make the cost/wait time of home delivery reach near-zero???).
Mike Duke said Walmart’s top objective is to become the #1 online retailer in the world. If one believes they can do that, then the brighter future is with Walmart. If one believes there is no catching Amazon, then they have the brighter future.
The Bezos and the Amazon team know retail better than any other retailer in the world. Everything they execute is to attract, hold and make life easy for their customers. The breadth of their ability to bring customers more products and services is unmatched.
What Walmart has going for it is not their size, but their vision of the future. They understand that today’s successful retail model will not be tomorrow’s. They understand that they will face the same challenges that the Woolworth’s and Sears faced in the past. They understand that unless a retailer changes over time they will not continue to be a leader. They understand that they can not be wedded to the 4,700 stores they operate.
Advantage Walmart – Brick & mortar scale
1. “Touch and feel” categories (e.g., fishing, firearms, fabric)
2. Ancillary services (financial, health and personal care, etc.) drive frequency and portfolio diversity
3. Site-to-store connectivity
4. “Un-banked”-friendly
Advantage Amazon – Digital-forward
1. Deep(er) data
2. Real-time agility
3. Endless aisle assortments
4. B2B offerings prop up etail
5. Prime program loyalty
Amazon has Walmart to thank for: escorting millions of lower income shoppers into digital through entertainment offerings, site-to-store, financial solutions, and more.
Walmart has Amazon to thank for: providing a digital-centric standard that its traditional competitors can’t.
Let us let the record show that Amazon is a 21st century fulfillment corporation with one world services and Walmart is a distributor with one world aspirations. They are not retailers in the true spirit of their goals and the tools they use to run, grow and defend their business interests.
Their strengths are in the achievement of excellence in operating and developing what the use to move product into the possession of consumers all over the world.
Their weaknesses include market specific detachment and extreme susceptibility to sudden market swings and desires leaving them in possession of very large amounts of clearance that costs a lot of money to store, move into play and sell.
It would be a monumental task to overtake either one. But staying alive and growing right in front of them is not so difficult as it may seem. Take a look at our Brain Trust Query in today’s three discussions and have a go with the three digital must do’s as a single collective plan for the things to do today.
Both have done a good job at being very clear about who they are and how they are different from the competition.
Walmart: drives their business through operational efficiencies.
Amazon: drives their business by understanding what the consumer wants and continually innovating in those areas.
I don’t think operational efficiencies will win out in the long run—continuing to place my bets on Amazon.
To old fashioned sorts like myself, Amazon’s weakness is its inability to consistently make a profit. Of course one could say that’s because it’s still in an early rapid-growth phase—and that may be true—but the weakness then lies in the information side, i.e. if the future CAN’T be like the past, it’s hard to know what it looks like.
But I think most of us realize—depending, of course, on how long-term you define the future—the answer is likely to be “neither one.”
Both have strong futures as each operates in a different physical market. In general, both offer similar value. Amazon has a major advantage in that it can offer much more variety as it isn’t constrained by a physical location. Walmart has the advantage of immediacy. Amazon is working to decrease its delivery time to 6 hours or less, while Walmart is working on increasing its web presence. If one wants to physically shop for products and make side by side comparisons, Walmart looks like the long-term winner, but it won’t be by a knockout. They will continue to fight in different rings—Walmart at B&M, Amazon on the web.
Amazon is going places retail has never gone before; Walmart is fighting to keep its position as competitors like ALDI, Winco and Dollar stores eat away at share, and growth is challenged by site limitations. Amazon is truly consumer centric, and executes very well. Experimentation and acquisition are part of their DNA. Walmart is constrained by the inertia of its size. Private labels are missing growth opportunities, cross channel integration has issues, etc. Amazon built its model on adaptation for growth; Walmart expansion has limited horizons in many areas.
The world of retail is changing rapidly, with consumers driving omnichannel merchandising, i.e. order and ship, anytime-anywhere. Retailers are struggling to change their business model to accommodate the new consumer who wants to sit in their living room, order what they want and have it delivered to the door two days later.
While Walmart isn’t going away, Amazon is the main driver of the new world of retail, largely because Mr.Bezos is totally committed to exceeding consumer expectations. Amazon lost money because it is investing in their future.
Dramatic change is here and will escalate. At one time A&P was a major retailer in the USA and is now almost defunct. I can’t help but think that Amazon is better positioned to meet the demands of the new consumer, as well as other companies focusing on mobile commerce, etc.
Retail is an inherently social business. As such, its richness is increased by sensory exposure.
I can email my wife, text my kids, tweet or post to my friends, but I enjoy all of them in the real world more. This is where the richness of our relationships is felt, is tested and grows.
I believe this to be true, and I believe this is one of Walmart’s greatest points of exposure. I go to Walmart for low cost and convenience. As such I’m not looking for the same richness of experience that I expect from a Nordstrom location, REI, or even Lowe’s.
Walmart’s convenience and cost is not dependent upon brick & mortar. Having maximized this model, they may be at the pinnacle of their existence.
Amazon has a long way to go in this regard, but the journey is still ahead of them, the options are many, and the opportunities almost endless.
Of course Walmart can still leverage all this opportunity, but it will be tougher. They have Bentonville in their DNA; small austere rooms where business is conducted with a single focus. Sure they can invest in a large team in the Bay Area, but I think the odds and history are against them.
On the other hand, if 3 years from now I’m wrong, they will have distinguished themselves as one of the greatest.
Both retailers face challenges in the future. As Amazon forces brick and mortar stores to close they may experience lower sales and/or higher returns because people may have no place to see the products. The reason Amazon works is that it can keep its overhead low…no stores and minimal theft with Amazon using the showrooms and the salespeople of other retailers. Is Amazon just a modern day Sears, JC Penney or Wards catalog? Time will tell.
Walmart, on the other hand, could be the next Kmart. Who would have thought they would fall so quickly and hard? The challenge I think Walmart will face in the future is that when the economy improves and the middle class grows the people who traditionally shopped there will refuse to go there because it will remind them of worse times.