For many years now I have been doing an annual analysis and comparison of Walmart and Amazon, the two most important retailers in the world.
Walmart of course deserves that place due to its stature as still the world's largest merchant (and company) and one that represents an often substantial share of many consumer goods companies' total sales. But Amazon is closing in.
In terms of total revenue, Walmart came in at $611.3 billion for its fiscal year ending in January, 6.7% above the $572.8 in sales the previous year, as Walmart was helped in several ways from rising inflation.
Amazon total revenue in 2022 was $514.0 billion, up 9% from the $469.8 billion in 2020, as it gets ever closer to Walmart’s top line.
Gilmore Says.... |
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| By my way of thinking, that means logistics costs as a percent of phyical product sales are continuing to rise rapidly at Amazon. |
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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 in the end to the retail supply chain.
So let's start with Walmart, based again on its full fiscal year ending this past January.
While Walmart is an incredible giant, its growth had been slowing in recent years- until lately, during and since the pandemic.
As can be seen in the chart below, Walmart's US sales (Walmart stores only) 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 an exception) for a few years.
As can be seen, growth in 2015 to 2018 has been a solid 3-4% (solid for a company that size that isn't Amazon). It then jumped back up to a robust 8.7% growth in 2020 in the stay at home economy, but then also saw a strong 6.3% rise in 2021 and 6.9% last year.
Total Walmart US sales (Walmart US + Sam's Club) reached $504.9 billion last year, 142% growth versus the $208.5 billion those two segments had in 2003, but as noted above that pace of that growth has obviously slowed substantially until the past three years. The Cumulative Average Growth Rate (CAGR) has averaged 4.5% since 2003, and now a strong 5.3% since 2015 after three good years.
Walmart's International's growth continues to struggle, despite an awful lot of attention and investment there for a time. Walmart International sales last year were $101.0 billion, about flat with 2021 and down big from $121.3 billion the year before.
They were at $125 billion all the way back in 2011. International is clearly not the Walmart growth engine once imagined, and is now something of a boat anchor for financial performance.
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, in the face of a generally flat share and the rise of Amazon.
SCDigest developed a methodology several years ago, where we compare Walmart's total US store 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 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 sales for Walmart than if you do not exclude those categories, which is how it often reported. When you hear numbers like this, make sure you understand how they are calculated.
By our measure, as seen in the chart below, Walmart had an 10.2% of US retail sales in 2022, just below the peak of 10.6% in 2009. I will note the government revised some of its data, so there may be some modest differences in this year’s numbers versus what I have presented in prior years (basic story is unchanged).
No one is worried any more that Walmart will take over the retail industry. Amazon is now in the regulatory crosshairs.
The big queston is: Will Amazon overtake Walmart for the top US retail spot soon? The answer, if you look at just retail product sales (on-line and in-store): it won’t be anytime soon (see more below).
Another question: Would the FTC now let Walmart (or Amazon) buy say Kroger or CVS? Hard to say. I think a definite No for Amazon.
Walmart still doesn't provide much detail on its ecommerce numbers, but it says it saw 12% growth in on-line sales in the US in calendar year 2022. Amazon meanwhile, has seen basically flat growth on-line sales for more than a year with a slght rise 4%) in Q2 2023. After explosive growth for Amazon and ecommerce generally during the pandemic, the market has clearly stalled.
Still, in Q1 Amazon had 48% of US retail ecommerce spend compared to Walmart’s 7%, according to estimates by news and analysis company PYMTS. Other sources have different numbers, but are generally close enough to these that show Amazon dominance.
Turning to Amazon, it 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 (unfortunately) changes it has made in the past few years in what numbers it provides.
Realize that of Amazon’s total sales in 2022 of $510 billion, approximately half of that (and growing) comes from services, such as its AWS web services unit, Fulfillment by Amazon, advertising revenue, marketplace commissions and more.
The chart below shows Amazon's recent growth in product sales on a global basis. So Amazon’s revenue growth overall was 9%, while product sales were flat.
As briefly noted above, it used to be easier to track Amazon's logistics costs, which include fulfillment (distribution center costs, including amortization of all those expensive FCs, plus some inbound transportation costs), and shipping expense, which is accounted for separately from fulfillment.
Amazon used to report net shipping expense (shipping costs minus any shipping revenues, including an allocation of Prime subscription sales), but it no longer does. That said, I am sure shipping still is a big loss leader for Amazon, almost surely several billion dollars per year at minimum.
But as a quick calculation, Amazon spent $75.1 billion globally on fulfillment in 2021 , and $76.5 billion on shipping, for a total logistics spend of an incredible $151.6 billion. That was up 27% over 2020 - versus growth in product sales of 11.9%. By my way of thinking, that means logistics costs as a percent of phyical product sales are continuing to rise rapidly at Amazon.
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 or section below.
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