The Amazon/Walmart Whole Paycheck Tracker: Rethinking And Realigning

While this tracker normally focuses entirely on the moves and counter-moves of Walmart and Amazon as they race for the greater share of the consumer’s whole paycheck, every once in a while another player manages to scoop them both in the headlines competition.

This week that player was Target, which entered into the sped-up shipping fray with the announcement it is making same-day delivery though Shipt available to all of its shoppers, according to a report by CNBC.  Previously, Target customers could get same-day delivery by being a Shipt member for $99 a year. That’s still an option, but now if a customer wants a one-day a la carte delivery, that is an option.

The news follows big next-day delivery announcements from both Walmart and Amazon — in a week where both retailers had a lot of news about repositioning themselves in the market and reporting some pretty major changes.

Starting with…

Amazon

Big Debate Of The Week: Did Amazon’s Estimated Online Market Share Just Drop?

While Amazon is fairly tight-lipped about specific numbers, eMarketer has cut its estimate of Amazon’s current online commerce market share in the U.S. by 22 percent based on CEO Jeff Bezos’ recent disclosure that independent retailers accounted for more than 58 percent of Amazon’s gross margin on retail sales.

That is the first time the company has publicly disclosed that metric.

eMarketer says based on that figure it projects that Amazon accounts now for 37.7 percent of online commerce this year — a sharp drop from its prior estimate of 47 percent.

eMarketer’s revision comes as Amazon is one of many major tech players being asked to account for the amount of market power it wields. Regulators have recently moved to divide up antitrust oversight of four big tech companies, which observers take as a sign that inquiries and regulatory processes are soon to follow.  Amazon, in responses to claims it is a monopoly (or at least the beneficiary of monopolistic business practices), often notes that it accounts for less than four percent of total U.S. retail sales.

Bezos, in noting the percentage of gross merchandise sales from merchants in a letter to shareholders in April, further added some color about the relative success of Amazon as a retailer versus its marketplace merchants.

“Third-party sellers are kicking our first-party butt. Badly,” he wrote.

An eMarketer spokesman has clarified that its estimate derived purely from the figure in Bezos’s shareholder letter, not exclusive information from Amazon.

So is Amazon’s market share a whole lot lower than previously thought, or is Amazon dropping data breadcrumbs that might lead analysts to that conclusion in an attempt to take some of the antitrust heat off?

It is a complicated question — and one greatly dependent on how exactly one lays out the math. We’ve still got our green visors on here at PYMNTS — check back on Monday (June 17) for our accounting of Amazon’s U.S. market share.

Au Voir :  A Farewell To FedEx And Food Delivery

It seems FedEx will not be renewing its express U.S. contract with Amazon, according to reports. The shipping company says the move is “a strategic decision,” though not one that terribly pleased its investors when it was announced.

In noting its reasoning for ending the delivery partnership, FedEx said Amazon made up less than 1.3 percent of company revenue in the last year. Moreover, as Amazon is continually increasing its investment in delivery logistics, they are appearing as more a competitor on the horizon than a collaborator.

The firm is also investing $1.5 billion in an air cargo hub to be built in northern Kentucky.  The company has leased 40 cargo planes and plans to add 10 planes to its roster in the next few years.

The news had little effect on Amazon’s stock price, which ended the day of the announcement up 2.6 percent.

But FedEx wasn’t the only farewell of the week.

Amazon also officially called it quits with its Amazon Restaurants food delivery service.

According to reports, as of June 24th the service is officially shutting down after four years in operation in over 20 U.S. cities as well as in London. The service offered Prime members the option of having food delivered via the Amazon Restaurants website or Prime mobile app.  The U.S. shutdown was preceded by the program’s closure in London in November 2018. Amazon will also be closing its Daily Dish lunch service for workers.

The move comes a few weeks after Amazon invested in Deliveroo, the U.K. delivery startup that raised $575 million in funding. Amazon led that round.

But while there were some steps back this week, there were also a few steps forward.

New To The Market: A Secure Credit Card And A Sneak Peak Theatrical Release

Amazon and Synchrony Financial are partnering up on a new secured card credit offer for Amazon Prime members looking to rebuild their credit.

The “Amazon Credit Builder” will require that individuals deposit $500 in an account to secure cards, which will then be offered back to them as their credit limit.

“There’s always going to be people that we can’t give credit to — this is a large population that we weren’t able to reach. It’s a new segment of the market,” Tom Quindlen, Synchrony executive vice president and CEO of retail card operations for the bank, noted in an interview.

Other than the deposit, the card’s features are in line with the standard benefits of a Prime Card such as 5 percent cash back on purchases. The application process is concurrent with the process for applying for other cards — if members are not approved for a standard store card offering they are offered the “Amazon Credit Builder” card.  There are no annual fees, but in order to get the cash back rewards, holders have to pay the $119 annual fee for Amazon Prime membership.

Also this week, Amazon announced that it is taking a page from Netflix’s book when it comes to how it rolls out its Oscar-bait original films.  Amazon announced it will release its political thriller “The Report” in theaters on September 27th, two weeks before it starts streaming it for Prime Members on October 11th. That is something of a divergence from Amazon’s normal pattern — “Manchester by the Sea” also had a pre-streaming theatrical release, but the gap between that and its streaming appearance was five months long.

The move will certainly fail to delight industry insiders who complain streaming is killing the theatrical release — but it will certainly ensure Amazon gets more eyes on its movie before the awards nominations go out.

Walmart

Big Shift Of The Week:  The Great eCommerce Reset

Some changes are coming soon to Walmart’s eCommerce business as Walmart continues to reposition the Jet.com business. This week it was announced that Simon Belsham’s role as Jet president is set to be eliminated — instead Jet team leaders will now report to Kieran Shanahan, who’s been overseeing Walmart’s food, consumables and health-and-wellness divisions online. Belsham will stay with the company through the early August to aid in the transition.

“Bringing together talent from Jet and Walmart into joint teams has created more opportunity for our business and our people,” said Marc Lore, co-founder of Jet.com who now serves as president and CEO of Walmart eCommerce U.S., in a blog post. “We’re now merging the rest of our Jet teams, including retail, marketing, technology, analytics, product and several others within Walmart. With the teams creating synergy, and Jet becoming even more focused, we don’t have the same need for a dedicated leader.”

A Walmart spokesman told CNBC that there are no layoffs planned and Jet’s headquarters will remain in Hoboken, NJ.

“This natural progression of integrating an acquisition allows us to fully leverage Walmart’s assets for Jet, and leverage Jet’s talent for Walmart,” Lore stated.

The move comes as Walmart has eased off promoting Jet in favor of its own eCommerce offering, as that is where the brand has seen the higher rate of return on marketing investments, according to Lore.

“However, in specific large cities where Walmart has few or no stores, Jet has become hyper-focused on those urban customers. It added iconic local brands in New York, and brought in products from brands like Apple and Nike, that you haven’t seen on Walmart.com. While this has made Jet smaller from a sales perspective, it has helped us create a smart portfolio approach where our businesses complement each other.”

Among those compliments, this week saw Walmart’s Jet-connect personal shopping service, Jetblack, releasing some news of success in NYC (the only market where the service is presently available).

According to reports from Walmart, two-thirds of customers reportedly engage with the service weekly and spend an average of $1,500 monthly on purchases. Jetblack is a subscription service — and a costly one at $50 a month ($600 a year), nearly six times the price of Amazon Prime.  But Jetblack users do spend in a month what Prime customers average on Amazon in a year, so Walmart has clearly proven there is a market for high-end retail concierge services — at least among affluent parents in NYC looking for a more efficient way to shop.

And while Jetblack is more costly than Prime by a wide margin, it is less expensive than startups like Hello Alfred and Magic, which offer similar services at a higher price point.

Jetblack delivers products from other retailers, though it does not deliver alcohol, tobacco, CBD-related products, fresh groceries, prescription medications or lenses.

Jetblack, according to reports, comes care of Walmart’s internal startup incubator Store No. 8. Jetblack Co-founder and CEO Jenny Fleiss said at the time, per reports, “The goal is to think about game-changing technologies that will change the way people shop.” The future of retail, according to Fleiss at the time, lies in leveraging technology to provide a shopping experience that can be individually tailored to customers’ needs.

The Supplier Diaries: A New Price Control Tool To Deal With Tariff Woes

Walmart suppliers now have an improved tool for submitting cost increases related to higher U.S. tariffs on Chinese goods.  The “Cost Change Scenario” tool, initially launched in 2018, enables vendors to choose the reason for a cost hike from a menu that includes tariffs, labor, transportation and raw materials, according to Bloomberg.  The tool is found in Walmart’s Retail Link system, also home to analytics capabilities that allow suppliers to predict what items will be in high demand and when.

The first round of tariffs, however, mostly missed Walmart suppliers. But the second time through, levies increased by 25 percent on $200 billion of goods, including handbags and furniture. There is also the looming possibility that another $300 billion worth of tariffs are on the way for clothing, shoes and electronics.

Walmart has promised to do everything it can to keep prices low for customers — but when price hikes come, the retailer ultimately has to decide whether to pass it on to the customer or to soak the loss to its margins.

“We’re going to do the best we can to manage through this in a way that our customers don’t feel it, pulling all the levers that we’ve got,” said CEO Doug McMillon said in a presentation to analysts last week. “I hope that this gets sorted, but we obviously don’t control that.”

However, the company has admitted that higher prices on certain items, such as bicycles, cannot be avoided. “Increased tariffs lead to increased prices,” said CFO Brett Biggs in an interview last month.

Grabbing Ground: Walmart’s Winning Streak On Wall Street

Walmart, according to recent Wall Street Journal reports, is on a massive winning streak when it comes to the stock market.  Walmart’s shares have risen 7.3 percent over the last eight trading sessions, the longest winning streak the retailer has lodged since 2012.  Walmart has also outperformed its chief competitor Amazon in both this month (June 2019) and during the entire second quarter thus far.

The push, according to experts, is fueled by underlying economic anxiety that has pushed investors to commodities, utilities and consumer staples as likely safe harbors in the event of an economic slowdown.

The Amazon outdraw has some market watchers surprised, however, as Walmart’s perceived lack of flexibility relative to Amazon’s is generally seen as a weakness. Mike Bailey, director of research at FBB Capital Partners, however, is not convinced that the recent show of strength is much more than a flash in the pan.

“Amazon’s still got a lot more levers to pull.”

And, as this tracker proves week-in and week-out, Amazon is constantly pulling, adjusting and then pulling those levers all the time.

But then, so is Walmart.

And increasingly, so is Target.

Because the race for the consumers’ whole paycheck is always ongoing — and apparently always expanding.