The phrase “fight of the century” I think was used generally in the boxing industry and then specifically for Muhammad Ali versus George Frazier – each undefeated – at Madison Square Garden in 1971. Frazier beat Ali in a unanimous decision in one of the greatest matches of all-time.
On the retail and supply chain front, we have our own fight of the century going on in the battle between Walmart and Amazon. It’s been engaged a lot longer than a single night, but is entering a new critical phase that could decides which company wins the war.
Gilmore Says.... |
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| Even with its hundreds of fulfillment centers and local delivery stations, Amazon can’t come close to Walmart’s store network, which may enable it to deliver cheaper and faster than Amazon. |
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I will note that soon we will again be publishing our look at Walmart vs Amazon by the Numbers, but an insightful article on this topic recently published by the UK’s Financial Times triggered a sort of preview column this week on that themes.
So let’s start with some numbers anyway. Walmart is still quite a bit larger than Amazon, with revenues this past year of $559 billion compared with $386 billion for Jeff Bezo’s company. But that nearly $200 billion gap was a lot bigger just a few years ago: In calendar 2016, Walmart had $485 billion in sales, while Amazon was much smaller $126 billion.
Right now, both retailers are taking aim at the other’s core business.
Let’s start with Amazon. Last September, it opened its first Amazon Fresh supermarket in Los Angeles, on the site of a shuttered Toys R Us store. This Amazon store was different than what is in effect a specialty grocery store that Amazon got when it acquired the Whole Foods chain in 2018.
This was a more of traditional grocer – albeit with some non-traditional technology. That includes carts featuring a computer vision to capture the items shoppers select, enabling rapid check out, while Alexa voice assistants are scattered across the stores to answer shoppers' questions.
The Financial Times reported that Amazon has added at least a dozen additional of these stores across the US, with several more under construction.
Amazon is gunning for a big share of the giant $1.3 trillion US grocery market – though a bit oddly to me, given it is historically a very low margin business. And it would appear that Amazon believes it requires a large brick & mortar store network to reach that objective.
This is not likely an existential threat to Walmart (as well as Kroger and others), but that doesn’t mean it is not a very serious one. More than 50% of Walmart’s US revenue comes from its grocery products.
 Meanwhile Walmart is doing everything it can to cut into Amazon’ enormous lead in ecommerce. According to analytics firm eMarketer, Walmart has just a 7% share of the US ecommerce market compared to Amazon’s 40%, though that’s just an estimate, since Walmart does not report its ecommerce revenues.
In its quarter ending in April, Walmart reported that ecommerce sales in the US rose by 37% - impressive, to be sure, but less than the massive 44% growth seen at Amazon in its first quarter ending in March.
And traditionally frugal Walmart is spending many billions of dollars to catch up. “It’s time for us to dial up our aggressiveness even more,” Walmart CEO Doug McMillon said at a recent investor day, according to FT.
So Amazon is making a direct attack on Walmart and other US grocers, while Walmart is spending big to find a way to grow ecommerce revenue faster than Amazon.
But of course the two battlegrounds are increasingly connected. Slow to takeoff, on-line’s share of the US grocery market has tripled to 10% over the past year, with predictions it will more than double from here by 2025.
For some time, Walmart has viewed its some 5300 US stores as a decisive advantage in the ecommerce war with Amazon. It upped the ante in late 2019, when as we reported then “McMillon has told key managers that the nearly 200,000 square feet Superstores, which handle everything from tires to groceries, will serve as hubs that tie all the company's offerings together.” (See Walmart Alters Course, to Make Supercenters Core of its Overall Strategy.)
It is estimated 90% of consumers live within 10 miles of a Walmart. Even with its hundreds of fulfillment centers and local delivery stations, Amazon can’t come close to Walmart’s store network, which may enable it to deliver cheaper and faster than Amazon, or make it more convenient to pick up at a store.
Hence Amazon’s rollout of brick & mortar groceries.
I will end with two quotes from the Financial Times article.
“It’s competition for top of mind: what is the place you think of when you think, 'I want to buy a soccer ball, I want a dress, I want ground beef',” Janey Whiteside, Walmart’s chief customer officer, told the FT.
And finally, David Spitz, CEO ecommerce software company ChannelAvisor, says that if Walmart is “able to crack the digitization of grocery [meaning being able to do it profitably], that’s a huge opportunity for them to keep Amazon at bay.”
I can only say “Let’s get ready to rumble!” What interesting times we live in.
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