Mid-Tier Retailers Caught Between Amazon and Walmart

For decades, the retail industry was organized around a familiar axis: price versus experience, scale versus specialization, mass versus premium.

That framework is no longer sufficient. Findings in the December 2025 “Share of Wallet: Amazon vs. Walmart” report from PYMNTS Intelligence reveal that, today, U.S. retail is being stretched by two different and increasingly incompatible forces that shape consumer behavior, capital allocation and competitive advantage. Call them essential gravity and discretionary gravity.

Essential gravity is built on repetition. Groceries, household consumables and everyday basics generate behavior that is habitual rather than exploratory. Shoppers return weekly, sometimes multiple times per week. They are price-sensitive, time-constrained and motivated less by discovery than by reliability.

Discretionary gravity works differently. It is built not on habit, but on aggregation. Categories such as electronics, home goods, apparel, books, toys and hobbies are purchased less frequently, but with greater consideration and higher margins. Demand is spikier, shaped by seasons, promotions and cultural moments.

As these two poles strengthen, the middle of retail comprising the broad swath of general merchandisers, category specialists and mid-tier brands may face a growing existential squeeze. The problem is not simply competitive pressure. It is gravitational. And gravity, once established, is hard to escape.

Why Price Is No Longer the Primary Axis

The report found that, on one end of the retail spectrum, Walmart anchors consumer behavior around groceries and everyday necessities. The model is defined by frequent trips, predictable demand, and resilience during inflationary or uncertain economic periods. On the other end, Amazon concentrates discretionary spending: non-essential, higher-margin categories that are seasonal, promotion-driven and volatile, yet structurally capable of faster growth and greater optionality. Combined, these two retail juggernauts accounted for $1.3 trillion in retail sales over the past 12 months. That represents 17% of the U.S. spending total.

Walmart’s scale in food and consumables has turned this repetition into a moat. Groceries account for well over half of Walmart’s U.S. sales, per the report, creating a steady stream of foot traffic and digital engagement that few competitors can match. In an inflationary environment, this position becomes even stronger. When budgets tighten, consumers don’t stop buying groceries; they trade down, seek value and consolidate trips.

But essential gravity has limits. Grocery is capital-intensive, margin-constrained and operationally unforgiving. Supply chains must be optimized for freshness and speed, labor costs are persistent and price competition is relentless. While grocery drives volume and defensibility, it rarely drives multiple expansion.

Critically, grocery trips do not automatically translate into meaningful cross-category expansion. The consumer mindset entering a grocery store — or opening a grocery app — is utilitarian. The mission is completion, not inspiration.

Read the report: Amazon Gains as Walmart Leans Harder on Groceries

On the discretionary side, the competitive battlefield has shifted away from stores and toward systems. Success, the report found, is increasingly determined by logistics networks, data infrastructure and ecosystem design rather than square footage or visual merchandising.

This model scales in ways grocery does not. Each additional category increases the value of the platform. Each incremental transaction feeds data that improves discovery and conversion. Advertising, subscriptions, and third-party services layer on top of retail margins, creating a flywheel that traditional merchants struggle to replicate.

Amazon, for example, has found its own strength is not any single category, but the ability to absorb demand wherever and whenever it appears. Search, recommendations, reviews, Prime membership and fulfillment combine to reduce friction at the moment of intent.

Still, discretionary gravity is riskier. It is exposed to consumer sentiment, macro cycles and promotional intensity. But it is also where growth lives. When consumers feel confident, discretionary spending expands rapidly. When new categories emerge, platforms, and not stores, can capture the upside first.

The question facing retailers today is not whether they can compete with giants on price or scale. It is whether they understand which gravity they serve, and whether they are willing to commit fully to it.