The grocery wild card: Could Amazon fully overtake Walmart?
Though grocery has long been a dependable source of success for Walmart, it is becoming a wild card as Amazon is potentially learning how to beat the 60-year-old retail icon at its own game. Blessed with a logistics operation that rivals the USPS, Amazon is making it easier and cheaper for consumers to shop for groceries from home with its Subscribe & Save programs and additional grocery delivery choices. Walmart has thousands of stores, but its immense weekly foot traffic is not necessarily helping drive revenue — its market share is actually trending downward in areas that really matter, like food and beverage.
“The Ongoing Battle for Consumer Retail Spend: Amazon Versus Walmart Q1 2022: The Grocery Wild Card” looks at the ongoing battle for consumers’ budgets sector by sector, examining why the world’s biggest retailers may find uncertain outcomes for once safe spend categories.
Walmart versus Amazon: Will in-store traffic always matter? Walmart’s most significant revenue driver is the millions of consumers visiting its stores weekly. In 2021, however, that revenue did not see a spectacular rise, even as consumers flocked back to stores after a year indoors.
PYMNTS’ data found that Walmart’s high foot traffic has not resulted in a massive rise in its retail spend, and alternatives like Amazon provide consumers with a range of appealing choices. Walmart shoppers are likely Amazon shoppers as well, which means new vulnerability to customer loss as shopping enjoyment and convenience become more important to customers who may fold rising gas prices into their decision to shop in-store. Walmart, at least for the moment, remains the leader in food and beverage.
Amazon will not rest, however. The eCommerce giant is no stranger to rapid, focused innovation designed to hit retailers where it hurts most — their areas of strength. Other competitors are also ratcheting up the pressure, offering delivery and online ordering as well as buy online, pick up in-store options.
As competitors like Kroger, Target and Costco aim their sights on the leaders’ market share, Walmart is under enormous pressure to transform its high levels of foot traffic into consistently increasing revenue, something it has not yet achieved. Walmart’s shoppable fulfillment center concept may amplify its leadership in this segment, but only if the big-box giant can manage to blend seamless online ordering with rapid delivery.
Amazon’s eCommerce dominance: Is it really too big to fail? While it is unlikely that Walmart could dethrone Amazon in eCommerce in the coming years, Amazon has only managed to carve away a small percentage of grocery sales from its chief food and beverage rival.
Amazon has just a 1.9% share of the food and beverage segment, including sales through Whole Foods Market, which pales in comparison to Walmart’s 18% share. Still, Amazon’s investment in this area is substantial, as are its earnings.
We found that Amazon’s 2021 food sales in the U.S. exceeded $239 billion. It stands as the number two retail grocer in the country, outpacing Costco, Kroger and Target — despite having just 662 physical stores.
The grocery wild card: Could Amazon fully overtake Walmart? Amazon’s ability to come from behind and overtake a leader is illustrated not only in its dominance in book sales, but also in many other segments — at least five, by our count.
For example, Amazon’s hold over the furniture and home furnishings market has grown from a respectable 9.9% second-place share in 2019 to a leading 14% in 2020 and 15% in 2021, leaving former leader Walmart well behind at 8.4%.
It is unlikely that Amazon will shift its business model to include thousands of physical stores as Walmart currently has, but its ingenuity and resources may very well flip the grocery model on its head, making it easier and more affordable for consumers to subscribe to purchase the same products for which they might have visited Walmart, all while offering shoppers a wider range of product choices. Because Walmart customers are likely Amazon customers, the battle for consumers’ dollars may come down to selection and consumer experience, aspects of shopping that are especially challenging for Walmart to perfect as customers shift more activities online.
