Walmart and Amazon by the Numbers 2018

For several years I have been doing some analysis and comparisons between Walmart and Amazon, that the two most important retailers in the world.

Walmart earns that place due to its stature as the world's largest merchant (and company) and one that represents an often substantial share of many consumer goods companies' total sales. Amazon obviously earns a spot as the dominant ecommerce company - at least in North America and Europe - and e-commerce is where all the action is right now, sucking most of the oxygen out of the retail room.

Amazon's actual or potential threat to a growing number of retail sectors is almost existential, and it is taking that to ever more sectors, such as drug stores/pharmaceuticals with its recently announced acquisition of on-line pharmacy Pillpack.

You can make an argument I should throw China's Alibab and maybe even JD.com into this mix as other ecommerce giants - maybe next year. They both remain China centric - for now.

Amazon continues its phenomenal growth, hardly even slowing down in the face of the law of big numbers. In news just last night, Amazon's Q2 2018 revenues were up 39% to $52.8 billion, while profits soared to $2.53 billion. Wow.

So we've been looking at both of these retail giants "by the numbers" in recent years, and it has become one of our most popular columns of the year, forwarded by many SCDigest readers to others in their companies.

But as I will explain in a second, getting your arms around the numbers is often harder than you might think.

What Walmart and Amazon are doing is obviously of interest to most other retail and consumer goods manufacturers, and I hope others as well, as in the end almost every company is connected to the retail supply chain.

So let's start with Walmart, based on its its full fiscal year 2018, ending this past January.

While Walmart is an incredible giant, its growth has slowed dramatically in recent years- though somewhat now on an uptick, driven in part by the strong US economy. As can be seen in the chart below, Walmart's US sales grew very rapidly in the beginning years of the 2000s, primarily by adding new superstores carrying groceries at a rapid pace into new markets.

But that growth soon decelerated, and in the recession year of 2009 started a pattern of mostly very low growth (2012 exception) that is not much above inflation on average, meaning real growth was almost flat or up a percent or so at best. But the news is better in the past two years.

Total Walmart US sales (Walmart US + Sam's Club) reached $377.7 billion last year, about double the $188 billion the company had in 2002, but the pace of that growth has obviously slowed substantially down. The Cumulative Average Growth Rate (CAGR) has averaged 4.77% since 2002, but has slowed to 2.87% since 2010.

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Walmart's international growth continues to plateau, despite an awful lot of attention and investment there. Walmart international sales last year were $118.1 billion, up just 1.7%, after a decline in 2016. International is clearly not the Walmart growth engine once imagined.

Walmart still doesn't provide much detail on its ecommerce numbers, but it says it saw 44% growth in on-line sales in the US in 2017.

Not all that many years ago, there were concerns (I think legitimately at the time) about Walmart gobbling a giant, monopolistic share of the US retail market. That fear has simply faded. With the recent very modest sales growth, Walmart's share of US retail has flatlined. SCDigest developed a methodology several years ago, where we compare Walmart's US sales versus relevant US retail figures - total retail minus autos and parts, gas station and other fuel sales, and restaurants/bars.

It's not quite perfect because Yes Walmart does sell some gasoline, but it doesn't break it out in a way we can use. Nevertheless, I think what we have is pretty good - and does reflect a higher share of US retail for Walmart than if you do not exclude those categories, which is how it is usually reported. When you hear all these numbers, make sure you understand how they are calculated.

By our measure, Walmart had an 11.1% of US retail sales in 2017, basically flat over the past 5 years, and down from a peak of 12% in 2009. It simply does not appear any more that Walmart will take over the retail industry. That is an interesting and important change - and its share seems unlikely to go much higher to me, absent an acquisition. Would the FTC now let Walmart buy say Kroger or CVS? Hard to say.

Now let's turn to Amazon, a company that provides a lot of numbers to analysts but getting the best insight from them takes some work. That is because of its several business units and how it computes certain ratios, and (unfortunate) changes it has made in the last year in what numbers it provides.

Total sales in 2017 were up 31% to an incredible $177.8 billion, but that includes digital media sales, subscriptions, and its rapidly growing profitable web services unit.

For a number of years I thought it was more interesting to look to look at what Amazon called "merchandise" sales, since that included a close analog to traditional retail sales and were most connected to a physical supply chain.

But Amazon no longer provides the merchandise sales numbers. It now provides "product" sales, but that includes, for example, sales at its Wholefoods grocery unit.

So I made up my own metric. I took what Amazon reports as sales from "on-line stores," then added revenues from what Amazon calls third-party services. That latter number includes commissions the company gets from its marketplace sellers, and revenues from Amazon's third-party logistics services, including Fulfilled by Amazon (FBA).

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So growth from this view has also been strong, ranging between 20-25% year over year each quarter.

In the end, I am trying to adjust the numbers Amazon reports for things like shipping and fulfillment costs against the right denominator, using for many years the now unavailable merchandise sales. That's because including shipping in comparisons including say web services revenues doesn't make sense.

So I am going to use my hybrid number instead. But in another disappointment, while Amazon continues to report its total shipping expense (which is shipping only, not DC fulfillment), it has stopped reporting its shipping revenue, which allowed the calculation of net shipping costs, always a major loss for Amazon.

So I simply track below the total global shipping gross not net expense against my hybrid revenue number. This makes sense to me, because that would include revenue from on-line product sales plus the revenue from FBA, under which shipping is provided to clients. If anyone has a better way, let me know.

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That ratio is coming out between 15-16% of those revenues, quite a lot - and lately rising. Though not reported, I am sure shipping still is a big loss leader for Amazon, probably several billion dollars per year.

I am out of room, even though I have more. Will do a part 2 on this as I did last year in a week or two.

Any reaction to these numbers from Amazon and Walmart? Any other data you would like to see? Let us know your thoughts at the Feedback button below.