The ongoing retail rivalry between giants Walmart and Amazon is escalating as the companies strive to innovate faster – but one still has a leg up in the consumer-centered arena of the competition, experts say.
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According to a new note from researchers at Moody’s Investors Service, Amazon is lagging behind Walmart in a few areas.
When it comes to the grocery aisle, researchers estimate that Amazon generated as much as $20 billion in revenue from groceries last year. Amazon owns Whole Foods, and also offers delivery through both Amazon Prime Now and AmazonFresh.
However, Walmart – which also owns Sam’s Club – generated an estimated $270 billion. It is the world’s largest grocer. While it already offers same-day pickup at thousands of store locations, Walmart announced last week that it would begin testing in-home delivery.
Researchers noted that Amazon’s “very limited, physical footprint” likely means it will continue trailing Walmart in this space. It also noted that promotions, like price cuts at Whole Foods, have not yet caught hold.
Amazon has a big head start on Walmart when it comes to third-party sales, collecting fees for helping to facilitate those transactions, but Moody’s believes Walmart will be able to narrow that gap. Its massive distribution network is a benefit, as is the fact that – unlike Amazon – Walmart is unlikely to offer a line of its own branded products in competition with the vendors it’s working with.
The fact that Amazon gathers data from its third party vendors and also sells its own products alongside theirs has rendered it a target for antitrust considerations on Capitol Hill.
Moody’s also noted that U.S. retail sales still heavily favor brick-and-mortar – with 85 percent of transactions still taking place in stores – another win for Walmart, which owns more than 11,360 retail units across the globe.
On the downside for Walmart, however, are headwinds in its international business and the fact that it lags behind in advertising.
Meanwhile, Amazon Web Services will continue to propel Amazon’s profits forward, in a space where Walmart cannot compete.
“It generates steady profitability, ‘financing’ the retail businesses prodigious investments and offsetting periodic and sometimes significant, operating losses on the retail side that can result from the myriad investments,” researchers wrote.
Amid the battle between the two retail giants, some small businesses are falling victim. Moody’s noted that once either Walmart or Amazon targets a new product to add to its business line, smaller retailers can be a casualty.