The fierce competition between retail behemoths Amazon and Walmart has a fresh twist: Amazon is becoming the go-to place for American shoppers looking to spend their “fun” money.
U.S. consumers increasingly favor the giant online seller for nonessential items beyond food and toilet paper, bypassing archrival Walmart. Both companies call themselves the premier places for one-stop shopping. However, Amazon’s overtaking of Walmart in sales during the last three months of 2024 due to a boom in discretionary spending signals that a growing number of shoppers prefer to make multiple stops at the biggest retailers. Amazon is increasingly seen as the place to go for discretionary spending, while Walmart is slowly losing its share. Amazon is also gradually treading on Walmart’s core category, food and beverages.
U.S. retail spending, which stood at a seasonally adjusted $625 billion in January, is the largest driver of total U.S. personal consumption. This includes housing, healthcare, financial services and recreation, among other categories. Retail comprises roughly 40% of personal consumption and accounts for 6.3% of GDP as a direct contribution, according to the most recent data from the St. Louis branch of the Federal Reserve. Once manufacturing and distribution are considered, retail contributes to approximately one-quarter of GDP. Due to retail’s impact on the economy, shifts in how consumers shop and pay at Amazon and Walmart, America’s top retailers, drive broader economic trends.
Amazon captured 10.7% of total U.S. retail spending in its fourth quarter ending Dec. 31, which is usually a happy period for retailers as sales soar during the holidays, according to PYMNTS data analysis. That’s a roughly 25% spike from the prior quarter when it snagged nearly 8.1% of the total spend, close to its average of 8.3% in the first three quarters.
The last months were key to pushing the online giant’s total U.S. retail sales for 2024 to $737.2 billion. This total comprises retail sales of consumer products (including from sellers), advertising and subscription services through online and physical stores and Amazon Prime subscriptions. Also, eCommerce drove 86% of the retailer’s total sales.
PYMNTS estimated Amazon’s U.S. retail sales through a proprietary model based on pro-rata estimates of categories and gross-ups of marketplace sales. The estimates account for the total value of marketplace goods sold.
Walmart, on the other hand, did not see a holiday spike. The retailer stayed consistent at roughly 7.4% of consumer retail spending throughout the year. In the last three months of its most recent fiscal year ending Jan. 31, the retailer saw total U.S. retail sales of $559.1 billion. Less than 5% of its sales came from eCommerce.
Tale of Two Retailers
Amazon’s recent gains reflect a pattern going back at least six years — and a harbinger of its future. By contrast, Walmart has seen — and faces — tougher sledding, with roughly flat sales growth since at least early 2019. The company warned of a slowdown in 2025. CFO John David Rainey told investors in a call on Feb. 20 that the company forecasted net sales to rise 3% to 4% for its new fiscal year. This is roughly on par with current inflation and a deceleration from its 5.1% year-over-year growth seen in 2024. He cited macroeconomic uncertainty and the potential impact of U.S. tariffs on foreign suppliers doing business with the company.
One factor shaping the competitive dynamic between the two companies is the growing consumer preference for convenience-driven purchasing. Amazon’s frictionless online shopping experience, vast product selection and extensive Prime membership perks make it a compelling choice for shoppers seeking value and efficiency. The company said that in the fourth quarter, it delivered more than 65% more items to its U.S. Prime members on the same day or overnight compared to one year ago.
Meanwhile, Walmart faces challenges bridging the gap between its well-established brick-and-mortar stores and its evolving eCommerce ambitions. Its report of 20% annual growth in eCommerce sales suggests it’s making inroads, if tiny ones, given that its net revenues for its last fiscal year rose just 4.1%.
The latest installment of PYMNTS Intelligence’s Whole Paycheck series estimates the two industry giants’ share of U.S. consumer spending overall. It also looks at their shares of consumer retail and eCommerce spend. The estimates are based on the earnings reports from 2019 through Q4 2024 and national data from the U.S. Census Bureau and Bureau of Economic Analysis (BEA).
Amazon Rising
Amazon captured more retail share in 2024 than in the prior year, largely thanks to a spike in total consumer spending during the holiday shopping season.
In the past several years, Amazon’s gains of share in consumer spending have topped Walmart’s in nearly all product categories. Already rising steadily for years, Amazon’s share of total consumer spending hit an all-time high of an average of 9.0% last year after notching 8.3% in 2023. In each three-month period last year, Amazon captured more retail market share than in 2023. With a 25.8% increase in the last quarter from the prior quarter, Amazon accounted for 10.7% of America’s total retail spending, its highest level to date. The retailer accounted for 1 in 10 retail purchases during that period.
Like many retailers during the holidays, Amazon sees annual spikes in total consumer spending toward the end of the year. But those increases keep getting bigger. In 2019, its Q4 growth was 6.0%. In 2020, its capture of consumers’ wallets soared to 8.1%. The year 2021 saw 7.4%, with 2022 (8.9%) and 2023 (9.9%) posting further gains.
The takeaway heading into 2025: Consumers increasingly prefer the convenience and variety that Amazon offers, especially when opening their wallets for holiday shopping.
Amazon’s market share increases in all retail categories.
Discretionary spending typically covers “wants,” not needs such as groceries, and goes toward things like electronics, clothing, eating out, travel and other nonessential items. Consumers mostly turn to Amazon for electronics, apparel and other nonessential purchases. Still, Amazon saw growth in sales in all categories of retail products for its just-ended year compared to the prior year. In the last three months of 2024, it accounted for 3 in 10 purchases of all electronics and appliances.
Significant for a company that competes head-to-head with America’s largest grocer, Amazon saw a meaningful boost in food and beverage sales. The company captured 2.7% of the total U.S. market compared to 2.3% a year earlier. While Amazon has had trouble breaking into food and drink, it’s slowly increasing its share, biting into Walmart’s dominant category.
The company’s aggressive pricing strategies, extensive advertising campaigns and seamless shopping experience on its digital platforms drive these gains. In recent years, the company leveraged data-driven insights to personalize recommendations, enticing consumers with targeted promotions and curated shopping experiences. The ease of one-click purchasing, combined with fast shipping options, significantly reduces the barriers between browsing and buying, making it easier for consumers to opt for Amazon over traditional retailers. This advantage becomes particularly evident in high-demand categories such as electronics and appliances, where convenience and competitive pricing play a critical role in consumer decision-making.
Walmart Stagnates
Walmart’s share of retail spending for the year ending Jan. 31, 2025, remained flat compared to year-ago levels, with no spike in last-quarter spending — suggesting that the holidays did not afford it the same boost Amazon got.
As Amazon gobbles up market share, Walmart’s piece of the pie has stayed the same. The company hasn’t accounted for more than 7.6% of consumer retail spending since Q3 2020 — a sign that it’s consistent in its performance but not growing like its rival.
While the consistency underscores its stability, it also surfaces the company’s challenges in capturing the holiday surge. Walmart’s flat growth also suggests that its traditional retail model, based on 5,205 brick-and-mortar stores, including Sam’s Club outlets, may be struggling to meet the needs of consumers, who increasingly prefer the convenience and variety of online shopping.
On the one hand, Walmart’s consistent performance underscores its well-established position as a reliable destination for everyday essentials and basics. On the other hand, while the company’s share of food and beverage spending grew in the last fiscal year, consumers turned elsewhere for other retail products such as electronics and furniture. One exception: car parts. In its most recent fourth quarter, auto parts were the only product category to grow for the retailer.
The contrast in growth trajectories for the two behemoths reflects both the success of Amazon in capturing consumer dollars and the challenges Walmart faces as shoppers increasingly buy online.
Amazon Is Increasingly the Go-to Place for Discretionary Purchases
Amazon leads in discretionary spending, while Walmart struggles to attract beyond grocery spending.
PYMNTS Intelligence data shows a clear shift in consumer preferences. Amazon is now the go-to retailer for discretionary purchases, while Walmart remains dominant for groceries. Walmart’s food and beverage segment remains its strongest performer, while non-grocery categories struggle. Meanwhile, Amazon has struggled to penetrate the grocery market at the same level. Still, its sales of food and beverages nudged up.
One of the most striking indicators of this shift is the widening gap between Amazon and Walmart across nonessential retail categories. Amazon now accounts for approximately one-quarter of all discretionary retail spending. Walmart’s share has declined to a five-year low of 5.5%. The disparity underscores increasing consumer reliance on Amazon for categories such as electronics, apparel and home goods, in which consumers prioritize online convenience and selection over in-store shopping.
Amazon leads in health and beauty and clothing.
Health and beauty is a key category fueling Amazon’s growth. At 2.5% in 2019, Amazon’s share of all U.S. retail health and beauty sales has steadily increased to match Walmart’s consistent share of roughly 6%. Amazon is now tied with Walmart, with each company accounting for 6.8% of total health and beauty sales in 2024. The holiday season benefited Amazon more on the vitamins and shampoo front. The company reported an 8.6% market share in its fourth quarter, while Walmart dropped to 6.3%.
Amazon has also experienced significant growth in clothing and apparel over time. In 2024, Amazon accounted for 16.2% of total clothing and apparel spending. In contrast, Walmart saw its market share drop from a high of 8.6% in 2020 to 6.4% in 2024. Amazon’s share of clothing and apparel spending jumped to 17.7% in Q4 2024 from 16.0% in Q3 2024. Walmart saw a decrease to 5.6% from 6.4%.
These findings further underscore Amazon’s recent success in locking into nonessential spending compared to Walmart, especially during the holiday season. As digital retail continues to shape the industry, Walmart faces the challenge of breaking out of its grocery-first identity to compete more effectively in the broader retail landscape.
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For more on the battle for retail dominance between these two major players, check out PYMNTS’ Amazon and Walmart coverage. Plus, view previous installments of the Whole Paycheck report:
