People Are Now Spending More On Amazon Than Walmart

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SEATTLE — Amazon eclipsed Walmart to become the world’s largest retailer outside of China, according to corporate and industry data. .

People, driven in part by increased demand during the pandemic, spent more than $610 billion on Amazon in the 12 months ended June, according to Wall Street estimates compiled by financial research firm FactSet. Walmart On Tuesday, it reported sales of $566 billion for the 12 months ending July.

Giant online Chinese retailer Alibaba is the world’s best seller. Neither Amazon nor Walmart is a dominant player in China.

Amazon has dethroned one of the most successful and feared companies of the last decades, surpassing Walmart. Walmart has perfected a thriving big-box retail model that cuts every possible cent of its costs, drives prices down and beats competitors.

But even with all that efficiency and power, the quest to dominate today’s retail landscape is winning on the internet. And no company has taken advantage of this better than Amazon. Indeed, the company’s delivery (many items arrive at your doorstep within a day or two) and its wide range of products first drew customers to online shopping and have since made more purchases. It also made the company’s founder, Jeff Bezos, one of the richest people in the world.

“This is a historic moment,” said Juozas Kaziukenas, founder of Marketplace Pulse, a research firm. “Walmart has been around for a very long time, and now Amazon is coming up with a different model and is replacing them as #1.”

Wall Street firms expected this retail stick to change hands in the coming years. But the pandemic has accelerated the timeline as people staying at home rely on deliveries. Walmart sales have increased sharply during the pandemic, but its growth has not matched that of Amazon, which has added hundreds of new warehouses and hired nearly 500,000 workers since the beginning of last year.

Walmart’s sales increased by $24 billion last year, the company said on Tuesday. Total value of everything people buy on Amazon during approximately the same period It has increased by nearly $200 billion, according to analysts’ estimates.

While the numbers are calculated differently, analysts regularly use them as a rough comparison. It’s easy to know the exact value of Walmart’s sales because nearly all of them come from its own inventory and are made public every quarter. However, analysts need to calculate an estimate of the value of Amazon’s overall sales, because many of the products people buy on their site are owned and listed by outside merchants. The company only publicly discloses the fees it receives from these transactions.

More scrutiny followed with Amazon’s success. And the company began receiving many of the same complaints about its treatment of workers and the impact on local and national economies Walmart faced during its biggest expansions in more than a decade.

“The Big Bad Wolf is now Amazon,” said Barbara Kahn, a marketing professor at the University of Pennsylvania Wharton School of Business and who has written several books on retail.

Amazon and Walmart declined to comment.

In the last century, few companies could lay claim to the world’s largest retailer. The A&P grocery chain was such a force that it was pursued by antitrust authorities in the 1940s. Sears surpassed A&P as the largest retailer in the early 1960s by targeting middle-class shoppers in the suburbs and expanding the department store model.

Then Walmart came.

In 1962, Sam Walton founded the retailer in a small town in Arkansas. Mr. Walton’s autobiography says he has “a genuine passion for winning—some might call it an obsession—” and eventually sold a wide variety of produce, including fresh food, at low prices. But his real innovation was to build a vast logistics network that worked with such precision and efficiency that it crushed many uncompetitive competitors.

In the 1990s, Walmart had surpassed Sears. And then it continued to grow, opening thousands of stores and acquiring other retailers around the world.

Just as Mr. Walton founded Walmart while Sears was rising, Mr. Bezos founded Amazon since Walmart was king in the early 1990s.

Guru Hariharan, who works in Amazon’s retail business, said that Amazon is playing a different game, eclipsing Walmart. Walmart has toughened its lock for physical stores and its grocery business. But online shopping is growing much faster than physical stores, despite only accounting for about one-seventh of US retail sales. According to eMarketer, Amazon takes 41 cents of every dollar spent online in the United States, while Walmart takes just 7 cents.

“They have their own domain where they are kings,” said Mr. Hariharan, who left Amazon and eventually founded CommerceIQ, which advises brands like Colgate and Kimberly-Clark on e-commerce.

Amazon’s rise has come in part because it launched its website to allow third-party sellers to list their products alongside products Amazon has bought and resold. This marketplace has greatly increased the assortment of products available. Nearly two million sellers offer products on Amazon, accounting for 56 percent of products sold.

The market makes it difficult to determine Amazon’s true influence in the retail industry. The company captures and reports only the fees it receives from sellers for listing, shipping and marketing their merchandise, not the total money flowing through its business. The model is more profitable, but provides less income.

“It makes the Amazon look smaller,” said Mr Kaziukenas. “They are obscuring the truth”

This has led analysts at investment banks like JP Morgan, BMO Capital Markets and Cowen to estimate what’s known as “gross merchandise value” to calculate how much customers buy on Amazon, regardless of whether it comes from Amazon’s inventory or from a seller. Analysts make forecasts based on company-published data and their own research, such as revenue it collects from vendors and the market’s share of total units sold. FactSet compiles and averages the predictions.

Over the past 12 months, Amazon reported total retail revenue of $390 billion. But overall product sales, including third-party transactions, were about 60 percent higher, according to analysts’ estimates.

Amazon didn’t regularly disclose gross product value, but facing antitrust pressure in 2019, Mr. Bezos shared the measure – later $277 billion — for the first time as a way to demonstrate that third-party sellers are growing faster than Amazon’s direct retail business. “Third-party vendors are kicking our first-party ass,” he wrote.

When Mr. Bezos testified in Congress last summer, he cited Walmart’s greatness as evidence of a competitive retail industry. “We’re competing against big, established players like Target, Costco, Kroger, and of course Walmart,” he said, “a company more than twice as big as Amazon”—presumably referring to Walmart’s revenue.

Walmart is still the largest private employer in the United States, with 1.6 million employees. It sells more than Amazon in the United States, although JP Morgan predicts Amazon will surpass Walmart in the United States next year.

During the pandemic, Walmart developed the ability to use its stores as mini-distribution centers that shoppers use to get their purchases “to the curb.” Walmart on Tuesday said it expects to generate $75 billion in total online sales this year. Mr Kaziukenas said the company has expanded its efforts to create its own market, but the vast majority of its online sales still come from its own inventory.

Edward Yruma, a retail analyst and general manager at KeyBanc Capital Markets, said that Amazon is only just beginning to grasp the reality of its size.

“Walmart is big and they know it,” he said. Amazon has long been playing the role of startups despite becoming huge. Just this summer, while already employing around 1.3 million people, Additional A new leadership principle that accepts responsibility for scale.

“We started in a garage,” the new principle begins, “but we’re not there anymore.”

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