24/7 Insights
- The growth of Amazon crushed many brick-and-mortar retailers.
- Walmart avoided that fate by flanking Amazon in important ways.
Amazon.com Inc. (NASDAQ: AMZN) was founded in 1994. At the same time, Walmart Inc. (NYSE: WMT) was on its way to becoming the largest retailer in America. As the broadband era was ushered in during the early 2000s, the fear began to emerge that Amazon would trample every large retailer in America. Indeed, Sears was severely damaged. So were Kmart and JCPenney. Walmart was supposed to be next.
Walmart was never next. It grew its store footprint to over 4,500. Eventually, 90% of the U.S. population was within 10 miles of a Walmart location. The country’s largest retailer became virtually ubiquitous. According to Statista, Walmart.com also became the second largest retail e-commerce site in the United States, behind only Amazon. This is the state with the most Walmarts.
Walmart did several other things to flank Amazon. It opened pharmacies and became the largest grocery provider in the country. It set up a system where people could shop online and pick up their orders at a Walmart store. In short, it did several things Amazon could not do or not do well because Walmart had such a large physical system.
Walmart’s latest earnings should put to rest the Amazon issue. Walmart’s revenue rose 6% to $161.5 billion, and per-share earnings rose 200% to $0.63. Perhaps the most impressive number was that e-commerce revenue was up 21% globally, “led by store-fulfilled pickup & delivery and marketplace.” The store pick-up strategy had worked.
In the most recent quarter, Amazon did well. Revenue rose 13% to $132 billion. earnings rose from $0.31 per share to $0.98. However, Amazon’s huge AWS cloud business carried much of the earnings load. Amazon’s total operating income in the period was $15.3 billion. AWS provided $9.4 billion of that. In that light, Amazon’s retail business is not impressive.
Amazon didn’t crush Walmart. And, without AWS, today’s competition may be tied.
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