There is a possibly apocryphal story of Amazon’s early days (around 2001) where Founder Jeff Bezos was invited to Bentonville, Arkansas to discuss the possibility of Walmart purchasing his still young – and, at this point, struggling – online bookstore. But Bezos really didn’t want to sell Amazon to Walmart; he wanted Walmart to outsource its still mostly nonexistent eCommerce business for Amazon to run on its platform.
Walmart executives politely declined, and the two firms went their separate ways.
Flash forward almost two decades, and Walmart and Amazon spend a lot of time thinking about each other – though the idea of Walmart purchasing Amazon has long since become somewhat comical. Amazon’s market cap is over $800 billion while Walmart’s is at $290 million, making one Amazon worth approximately 2.5 Walmarts.
Of course, that’s not an entirely fair comparison, since Amazon’s empire includes its massive AWS cash machine. But with its roughly 50 percent share of all online retail, its $13 billion acquisition of Whole Foods and the expansion of its cashless convenience stores, Amazon is a serious retail challenger.
And that includes the consumer’s share of wallet. As the latest updates to the PYMNTS Whole Paycheck Tracker indicate, Walmart continues to have the same difficulties in facing off against Amazon that have been the trend for the last five years: Walmart controls more of the consumers’ retail and total spend, but Amazon is rapidly eroding that lead with big gains.
By the numbers, Walmart commands 9.1 percent of the consumer’s total retail spend as of February 2019, compared to Amazon’s 6.4 percent – but flash back to 2014: Walmart controls the exact same share of retail spend as it did then, while Amazon’s share has grown by nearly 300 percent.
Share of total consumer spend, however, is perhaps a more sobering figure. Walmart holds the lead – by a slice – and Amazon’s rapid growth over the last five years suggests those lines will soon intersect.
But Walmart is certainly not settling into second place gracefully, nor is it about to give up much more of its market share than absolutely necessary.
Coming off its last earnings report, Walmart reported its strongest holiday earnings in a decade, with a total revenue increase of 1.9 percent. Walmart has recorded 18 quarters, or over four straight years, of comparable U.S. sales growth, unmatched by any other retailer. It also saw online revenue growth of 43 percent during the quarter, and 40 percent growth in its eCommerce sales on the whole for 2018.
The company credited that pickup to a broader assortment on its website, improved delivery services and increased use of store pickup for online grocery orders (grocery is Walmart’s biggest sales driver). The retailer also noted that digital grocery basket orders have been increasing: Curbside pickup will be at 3,100 stores by next January, and delivery will double to 1,600 stores.
Looking at the Whole Paycheck Tracker, food is one of the few categories where Walmart continues to hold a commanding lead on Amazon: 19.1 percent of the consumer spend as opposed to Amazon’s 1.9 percent. But it has only been 18 months since Amazon bought Whole Foods, and that number is on the uptick. Walmart’s share has remained relatively flat over the last four years.
Health and personal care comprise another area where Walmart leads, with over 5 percent of the market. But again, Amazon is growing fast and strong, from less than 1 percent four years ago to 2.2 percent today.
In short, the race is on – and it’s running on a variety of tracks, as each super-retailer battles to create an ecosystem that commands a larger share of the consumer’s whole paycheck. And because the news comes quickly – and often in large blocks – PYMNTS will keep you posted each week on how Amazon and Walmart are moving, and counter moving, to grow their share of retail and consumer spend. The numbers only change every quarter, but the updates on what they’re doing – well, that’s a daily thing.
And, as luck would have it, there is no shortage of things to cover for our inaugural edition.
The Big Move of the Week: Walmart Embraces POS Financing
Walmart has announced a new partnership with digital lender Affirm that will make Affirm’s POS underwriting services available as an alternative to cash and traditional credit at nearly 4,000 Walmart Supercenters nationwide. Customers will also be able to use the service online at Walmart.com. The rollout will happen over the next several weeks.
“Walmart serves millions and has become a leader in the retail landscape with its commitment to help shoppers ‘save money and live better,’ which closely mirrors our own mission to improve lives with our products,” noted Affirm CEO Max Levchin. “I’m looking forward to introducing Walmart customers to a modern and innovative way to buy the things they need.”
Loans will range from $150 to $2,000, with terms of three, six or 12 months. To complete a purchase, consumers are offered a barcode that is scanned in-store by an associate.
As Levchin noted in an interview with PYMNTS, retailers report that consumers who use Affirm leave with a 75 percent greater basket size and enjoy site-wide conversion rates as much as 20 percent higher, with revenue-per-visitor lifts of more than 10 percent.
Product Play: Bring Up Premium Baby
Walmart will now be the exclusive retail partner of Hello Bello. Founded by actress Kristen Bell and her spouse, actor Dax Shepard, it is a line of premium baby care products developed for “value-oriented” parents.
“Parents shouldn’t have to choose between what’s good for their baby and good for their budget. That’s why we couldn’t ask for a better exclusive retail partner than Walmart, who is making it possible for us to offer premium products at a non-premium price,” Shepard noted.
The move comes as Walmart has been expanding its push into the baby product market, having revamped its baby department in over 2,000 of its stores and expanded its baby assortment by 30,000 items. It’s a move that follows the market: Walmart.com has seen searches for baby-related items jump by a whopping 40 percent, per reports at the time.
Logistics Look: Lowering Costs and Embracing Teamwork
Walmart has begun expanding the scope and capabilities of its private fleet, according to reports. Walmart officials say they are reassessing terms of contracts with third-party service providers, with an eye toward handling more deliveries in-house and converting part of its inbound highway freight to lower-cost rail shipping.
Currently, Walmart employs more than 8,000 drivers and uses its fleet of more than 6,400 tractors and 60,000 trailers to deliver goods to the vast majority of its 4,700 stores in the United States. As part of an attempt to lower transportation costs, over the past year, Walmart has replaced dedicated contract carriers at distribution centers in Lewiston, Maine; Gas City, Indiana; and, most recently, in Washington Court House, Ohio, displacing fleets operated by Prime Inc., US Xpress Inc. and Schneider National Inc., respectively.
Walmart is also one of a handful of retailers working with FedEx on an experimental robotic delivery effort. Testing of the project, which will deploy a robot for “last-mile” delivery efforts, will begin this summer, and will be supported by Walmart, Target and Pizza Hut, among others.
“The FedEx SameDay Bot represents the next chapter in our long legacy of delivering innovation and outstanding service, supported by an already existing FedEx logistics ecosystem,” said Brian Philips, president and CEO of FedEx Office. “The companies [that] have provided feedback on its potential use have been instrumental in ensuring we are looking toward the future of eCommerce.”
Unexpected Directions: Digital Ads and Natural Voice Processing
Walmart announced that it will consolidate advertising sales for its stores and websites as part of an effort to push profits from an untapped business. The push for digital advertising revenue puts the retailer into direct competition with most of the FANG, as Facebook, Amazon and Google are all major players.
According to the firm, Walmart suppliers looking to advertise will deal with one consolidated inside team instead of a mix of different groups in the company and third-party digital ad space sellers. The move comes as rival Amazon is boosting profits by letting merchants pay for high placement in its search results. Its ad sales and other revenue jumped 95 percent to $3.4 billion in the fourth quarter.
During Walmart’s investor day last fall, Chief Executive Doug McMillon said its ad business was “tiny” and that “it could be bigger.”
“We have a unique opportunity to leverage our first-party shopping data from online and offline purchases to reach our customers and influence their purchase decisions,” Walmart Chief Merchandising Officer Steve Bratspies said in an interview.
In other slightly unexpected moves, Walmart announced it has acquired Aspectiva, the Israel-based startup focused on natural language processing capabilities. The financial terms of the deal have not been disclosed, but early details indicate that Aspectiva will join Walmart’s Store No. 8, which is the incubation unit it rolled out in 2017.
Walmart said the company’s technology will help it enhance the shopping experience across its channel. Aspectiva’s team joined the incubation as of this week and will continue operating in Tel Aviv.
According to Walmart’s Principal of Store No. 8 Lori Flees, Aspectiva’s technology in machine learning and natural language processing will have a “profound” impact on how customers shop in the future.
The Big Move: Prime Deliveries on Amazon Day
If you already have one day named for you – Prime Day, in Amazon’s case – why not go for two?
It’s logic pervasive to Amazon, which announced the launch of Amazon Day, a new delivery service that lets Prime members in the U.S. pick the day of delivery each week. With the new service, Amazon will group orders together and deliver them on the same day of the week – though if customers have a pressing need, they can also choose the two-day Prime shipping rate for specific items.
The move comes as part of the brand’s sustainability efforts to achieve Shipment Zero, its vision to make all Amazon shipments net zero carbon. By 2020, the retailer aims to make 50 percent of all shipments net zero.
“Prime members can now choose to get their orders delivered together in fewer boxes whenever possible on the day that works best for them,” said Maria Renz, vice president of delivery experience at Amazon. “We’ve been testing this program with a group of Prime members, and Amazon Day has already reduced packaging by tens of thousands of boxes – a number that will only continue to grow now that the program is available to Prime members nationwide.”
Once Prime members choose the day to have packages delivered, they can add orders to Amazon Day. All items arrive together on the chosen day.
Vertical Hopping: The Pharmacy Expansion Pushes Forward
Amazon has chosen Nader Kabbani to serve as the head of their emerging pharmacy business. Kabbani is a 14-year company veteran who was formerly the head of Amazon Flex. He will now go by the title “vice president of consumables, special projects.” Employees reporting to Kabbani include the team at PillPack, which Amazon acquired for more than $800 million in June 2018.
The move comes as Amazon is looking to make a move on the $600 billion per year market that pharmacy spending represents. The PillPack acquisition was considered a strong signal of Amazon’s intent, though the team has been relatively quiet since the deal. PillPack has, however, filed for several new pharmacy licenses, most of which are to secure clearance to ship drugs from its warehouse in Phoenix to customers.
Analysts have also identified additional licenses for operations in Washington, New Mexico and Indiana.
Stay tuned – they might not be keeping quiet much longer.
Logistics Look: The Coming Electric MegaFleet
Reports have emerged that “megafleets” of Amazon delivery vans and trucks are coming.
What is a “megafleet?” It’s a term to describe the tens of thousands of vehicles owned by certain companies like Amazon, which will be going electric.
According to a Morgan Stanley report, the eCommerce company’s goal of having half its delivery trips “carbon neutral” by 2030 will spark a buying spree of electric vans and trucks. While Amazon won’t be the only major company making such a move, Morgan Stanley said, it will be one of the bigger ones: “We think investors should prepare for more moves by megafleets to solve for sustainability.”
And, according to GreenBiz, early indications of Amazon’s moves in this direction are shown in a (relatively small) order that has already been placed for electric vehicles.
“Amazon does have at least one small public EV purchase order – 100 EV Mercedes-Benz Sprinter vans – that it plans to use in Germany,” GreenBiz said. “It might sound like a stretch for Amazon to make its own electric delivery fleet, but the company actually has made major leaps in cleaner logistics before. Amazon is one of the largest purchasers of fuel cell-powered forklifts for its warehouses, and it made a big investment in fuel cell maker Plug Power.”
Security Shore-Up: Keeping Counterfeiters in Check With AI
Amazon, which has long struggled with counterfeit products appearing on its site, is using artificial intelligence to fight the problem. On Thursday (Feb. 28), the company unveiled Project Zero, which it says will allow brands to take down counterfeit items on their own without Amazon's help.
In addition, Amazon's new product serialization service offers a unique code for every item, which brands place on products during the manufacturing process. When products with these special serial numbers are ordered, the company scans and verifies the authenticity of the purchase and can stop transactions for fake products.
Amazon has been testing the new offering with brands such as Vera Bradley, ThunderWorks and ChomChom Roller. So far, the system reportedly finds 100 times more suspected fakes than its previous process of relying on what brands report to the company.
The project is powered by AI, which constantly monitors the site and pulls down suspected fakes on the basis of data that companies provide to Amazon. That can include logos, trademarks and other important information about the brand, which the machine learning can then incorporate into its rules to better spot fakes.