Walmart Amazon whole paycheck

Walmart Amazon Whole Paycheck Tracker: Physical Footprints, Grocery Gains

grocery cart

As of the first day of August 1994 more people had walked on the surface of the moon than had bought things online, because online shopping did not yet exist. That changed on the 11th day of the month that year, when the first internet purchase in history was made by a Philadelphia resident with a Visa card. It was a Sting CD.

Flash forward two and a half decades and it is fair to say that eCommerce has caught on with consumers. One can observe that in the $2.8 trillion in annual digital sales made worldwide, or one can take a quick glance at the U.S.’s two resident retail superpowers’ race for the consumer’s whole paycheck this week.

The world’s largest physical retailer, Walmart, spent much of its earnings call with analysts discussing its digital commerce victories and expansion. Meanwhile the world’s most successful eCommerce retailer, Amazon, was expanding its physical footprint, but with its ongoing series of digital upgrades.

Because to win the race for the customer’s whole paycheck, one has to go where their spend is, and increasingly that means finding them everywhere — online, on mobile and via lots of connected devices in between.

Amazon 

Big Play of the Week: The Power of Prime Day to Move Markets 

That Amazon’s in-house shopping holiday has the power to move consumers is at this point a well-established fact.  We all know at least one person who got up in the middle of the night to start shopping the deals as they were rolling in live. And given the host of other sales that sprung up from other mainline retailers during the Prime Day time period, it is also probably fair to say Amazon has also demonstrated the power of its invented holiday to move competitors.

But this week, care of a report from Bank of America, the world learned that Amazon Prime Day also has the power to numerically move the entire retail market for that entire month.

Michelle Meyer, Bank of America Merrill Lynch’s head of U.S. economics, told CNBC that she expects retail sales — excluding autos — to have risen by 0.6 percent, with about half coming from Prime Day and other promotions by rival retailers. She also forecasts headline retail sales to rise by 0.4 percent.

“We’re above consensus. We think it’s a strong month,” said Meyer. “It wasn’t just Amazon. A number of retailers had these summer Black Friday deals.”

Meyer was right that the month was strong — pulled up by the shopping rush mid-month spurred by Amazon Prime. Though, when the numbers came in, it turned out she actually wasn’t bullish enough. Retail sales excluding auto and gas were up 0.9 percent in July, while general retail sales were up 0.7 percent.

BofA economists came up with their predictions based on Bank of America credit card data, which showed spending rose by 0.8 percent. Meyer added that Prime Day has seen higher spending each year since it launched five years ago, but that 2019 saw a significant increase.

Significant enough, apparently, to set off an unforeseen retail sales surge for a month.

Rethinking Returns: A More Charitable Use For Unwanted Goods

Amazon is launching a new program, Fulfillment by Amazon (FBA) Donations, that will allow third-party sellers to donate excess or unwanted inventory to charity.

The new program will let the sellers store their inventory in the eCommerce giant’s warehouses in the U.S. and U.K., and then donate those items to a variety of charities, according to CNBC. The program will become the default option for all sellers that store products in Amazon warehouses in both countries starting on Sept. 1; those who want to opt out must do so explicitly.

The program comes after Amazon faced a mild PR tempest over recent reports revealed that Amazon routinely discards unsold inventory, with one French TV documentary estimating the company destroyed over 3 million products in France last year alone.

“This program will reduce the number of products sent to landfills and instead help those in need,” Amazon wrote in an email to sellers, reports said.

Stores on the March: Seattle, Boston and Nashville 

It was a big week for Amazon’s expanding list of physical retail shops in major metros this week, as the firm  announced it is set to open an Amazon Books location in Nashville, as well as an Amazon 4-Star store in Boston.

Those two announcements immediately followed the  launch of its latest (and fourth) 4-star store in its Seattle HQ. The first location opened in New York City last September. Located in SoHo, on Spring Street between Crosby and Lafayette streets, the store features products that are rated 4 stars and above, are top sellers or new and trending on Amazon’s website.

“We created Amazon 4-star to be a place where customers can discover products they will love. Amazon 4-star’s selection is a direct reflection of our customers — what they’re buying and what they’re loving,” the company wrote in a blog post at the time.

Amazon Books debuted at Seattle’s University Village mall in 2015, and has since grown to 19 stores. As of its last earnings report, Amazon’s Physical Stores division accounted for $4.3 billion in revenue, even though sales grew by only about $18 million over the previous year or less than 1 percent. But, as CFO Brian Olsavsky noted, there are many ways to understand an count the value of offering physical shops.

“We think the bookstores, for instance, are a really great way for customers to engage with our devices and see them, touch them, play with them and become fans. So we see a lot of value in that as well,” he noted.

And speaking of investments paying out over the long term …

Walmart 

The Big Play of the Week: Solid Earnings, Solid Digital Infrastructure

Earnings day was a good one for Walmart investors, as the retailer managed to come out ahead of analyst predictions on revenue, same store sales and earnings for the second quarter of 2019.

“Customers are responding to the improvements we’re making, the productivity loop is working and we’re gaining market share,” CEO Doug McMillon said in a statement shortly after the results went public.

Investors also liked what they were seeing, and Walmart’s stock ended the day 6.1 percent up from where it started pre-market opening that day. It was a sharp contrast to Amazon’s earnings release a few weeks ago. Amazon came out ahead on revenue, but missed on earnings expectations, bringing in $2.6 billion instead of the forecast $2.8 billion. It was Amazon’s first earnings miss in four years — and was explained by CFO Olsavsky as an outgrowth of the cost increases incumbent on shifting a significant portion of Amazon’s inventory from two-day Prime shipping to one-day Prime day shipping. In Q2, Amazon spent more than the $800 million it has forecast it would spend in the second quarter on the one-day migration — though he did not offer a specific figure on how much more.

“It does create a shock to the system, and one we’re working through now. We suspect we will be working through it for a number of quarters, but when the dust settles, we’ll regain our efficiency over time,” he said of the one-day shipping cost-benefit.

Amazon stock price, however, has been paying for the time the firm is taking to work those changes through: the stock is down roughly 12 percent as the market opened Friday (Aug. 16).

Walmart CEO Doug McMillon, by contrast, spent much of his remarks to analysts discussing how Walmart’s existing physical assets combined with its massively upgraded investment in digital commerce has put its shift to one-day shipping under cost and ahead of schedule.

Walmart announced in May that it was rolling out next day delivery in three states, with plans to expand to 75 percent of all U.S. shoppers by the end of 2019. Now, McMillon announced that goal has already been cleared as of the end of Q2, and Walmart will be looking to further expand the program through the back half of 2019.

“Customers are responding well, and we’re improving our economics by having inventory close to the customer which helps us reduce split shipments and the use of air freight,” he said.

Walmart’s eCommerce sales were up  37 percent during the quarter, and Walmart noted that its variable costs per unit have declined which in turn improves gross margin.

“We’ve quickly grown this piece of the business in recent years, and I know we can do even more as we look ahead,” McMillion said.

Much of that “more” seems to be increasingly focused on its digital grocery business. As of the start of the third quarter, Walmart has 2,700 stores that offer free grocery pickup and more than 1,100 stores that offer same-day delivery. By the end of the year, Walmart has confirmed it plans to expand those programs by  400 and 500 stores respectively.

“As we scaled grocery pickup in the U.S., it unlocked new capabilities like grocery delivery,” McMillion said. “Customers love these services, and we’re rapidly expanding them to new locations.”

And speaking of grocery, Walmart go some outside data confirmation this week that digital grocery efforts aren’t just successful but pretty dominant.

Win of the Week: The Race For Digital Grocery Dollars 

According to new research out this week from retail data firm Second Measure, Walmart is racking up a pretty commanding lead in the race to serve up consumer groceries digitally. According to the data, as of June 2019, Walmart has 62 percent more customers than its nearest rival in the digital grocery delivery game, Instacart.

Most of that advantage is chalked up to scale and size. Walmart has thousands of stores spread nationwide that offer either pickup or grocery delivery, which means it just covers larger pockets of consumers than many of its rivals, some of whom are purely regional players.

Also, a deeper look at the Second Measure data does turn up some things that might make one pause before crowning Walmart the undisputed champion of digital grocery. Walmart’s strength in urban areas is much diminished and in some places like New York on San Francisco it is basically nonexistent.

Also, Amazon is competing against itself in these figures, as Second Measure counts Amazon Prime Fresh grocery delivery as a wholly separate services from Prime Now grocery delivery based out of Amazon-owned Whole Foods stores. Prime Now is a rapidly growing service, Amazon Fresh is the digital grocery service that pre-existed it that is contracting annually. A unified Amazon offering wouldn’t have more market share than Walmart, but would be making a healthier showing than the two services are separately.

And, given the power of digital grocery to drive consumer spend, it seems safe to assume that both Amazon and Walmart will be beefing up those digital efforts to make sure that is a part of the paycheck they can get locked down.

The latest earnings rounds are now out of the way — the next big round of consumer spend to capture will be back-to-school shopping and once that starts it is one event after another until the mad holiday shopping rush begins.

We’ll keep you posted on who gains poll position through the toughest section of the track coming up.

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