Retail

Walmart’s Earnings Will Reveal How Well Its War With Amazon Is Playing Out

Walmart

Everyone knows the old joke about Whole Foods — the grocery store so expensive that it might as well be called “Whole Paycheck.” Whole Foods always maintained that nickname was unfair — but after the $6 asparagus water incident in 2015 it was hard to take those denials all that seriously.

No one makes that joke these days. As of 2019 when someone is talking about “whole paychecks” and Amazon, it’s not a joke so much as an explanation of the firm’s approach to the market. Which means for those who want to compete with Amazon — most notably Walmart — there is no time for kidding around. Instead Walmart has been gearing up for a battle royal — and as of tomorrow when its earnings hit the wires, the world will get an update on just how well things have been proceeding.

The War For Market Share

Walmart has spent billions upping the ante on its digital and omnichannel offerings as it has moved to square off with Amazon for its hold on consumer paychecks. That effort over the last few years — from its $3 billion acquisition of Jet.com to its smaller digital moves like purchasing ModCloth and MooseJaw — has made it obvious Walmart isn’t just interested in expanding its offering for consumers. Walmart is building a new commerce ecosystem.

And when Walmart announces its Q4 earnings tomorrow (Feb. 19) the wide expectation is that the public will get a view into that ecosystem and how it is doing as Walmart offers up an update as to how it fared against Amazon during the 2018 holiday shopping season. Analysts are looking for increases in sales — and slimmer margins — and a set of Q4 results that showcase how Walmart’s investments to take on Amazon and other eCommerce firms are playing out.

Because given all the moves Walmart has made in even the last several weeks, it is evident that the state of play is very active.

Some of the more recent of those investments include Walmart’s announcement that it is going into online home furnishings, getting into the tiny home game with Allswell, expanding its buy online, pickup in store (BOPIS) grocery offerings, expanding its grocery delivery options and moved to dramatically expand its private label business.

And that is just the Walmart-centric stuff. Walmart subsidiary Jet.com has recently announced expanded initiatives to attract and retain millennial shoppers, a partnership to deliver seafood with Fulton Fish Market and a meal kit delivery partnership with Blue Apron.

Walmart has been a busy bee for the last 24 months — and is intent on staying one. Because the compeition from Amazon isn’t only coming, it’s growing.

Why Walmart Has Reason To Worry

By the numbers, Walmart and Amazon look pretty evenly matched in the battle for the paychecks of American consumers. Today, based on brand-new PYMNTS proprietary analysis, Walmart accounts for roughly 8.9 percent of consumer retail spending in the U.S. and 2.8 percent of all consumer spending in the U.S. Meanwhile Amazon accounts for 6.4 percent of retail spending and 2.1 percent of the whole paycheck.

The difference is the Amazon share has been growing — both in terms of retail sales and the whole paycheck for the last several years. Walmart’s growth, on the other hand, has been flat. And the story gets worse for Walmart — according to PYMNTS data, that gap is going to narrow and reverse based on current trends that indicate Walmart is losing market share to Amazon in many of the key categories that drive big chunks of consumer retail spending today.

And that, noted Karen Webster in a recent piece, does not even factor in Amazon’s Alexa Voice platform — and the tremendous commerce tailwinds Amazon control via its voice ecosystem. PYMNTS’ latest How We Will Pay study indicates that 28 percent of all consumers own a voice-activated device, and 27 percent of those use it to make purchases.

And that is after about four years.

“If you’re Walmart, those facts — are downright scary,” Webster said.

Walmart Battles Back

Walmart may not be a growth story today, but it is intent on becoming one, with lots of digital investments focused on holding the ground it currently controls — and building out upon it.

Will it work?

That is a hard question — and it will take a lot for Walmart to catch Amazon’s growth numbers, which are hard to describe without using the word remarkable. And the pressure is on — Walmart tossed up same-store sales growth, revenue and earnings figures in Q3 above and beyond analyst expectations, and that it had displaced Apple for the No. 3 digital retailer spot in the U.S.

Investors responded by sending its stock price down 2 percent. The results were good, but investors can see Amazon’s growth numbers as well as anyone, and good is no longer good enough for Walmart — in a race against Amazon the expectations are just higher than that.

But Walmart seems primed to show off its results from Q4 2018. We’ll keep you posted on what it pulls out.

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