Is Walmart Plus’s Growth Going To Rival Amazon?

 

The two largest retail companies in the U.S. are Walmart and Amazon. For years, e-commerce has accounted for more and more of the total U.S. retail sales. When businesses began to close their doors in March of 2020, that trend rapidly accelerated. Businesses quickly had to adjust to accommodate the influx of online shoppers. Companies with an established online presence thrived when they could handle the increased demand. Companies with little or no experience of ecommerce struggled or closed their doors.

One of those companies that thrived is Walmart. Their ecommerce sales soared 97% in the second quarter of 2020 compared to 2019. The growth began in March of 2020 and peaked in August. As public officials in some states began to ease pandemic restrictions, their online sales plummeted. By April 2021, Walmart’s e-commerce sales trends began to mirror pre-pandemic trends.

Sales Trends

In June 2021, J.P. Morgan analysts predicted Amazon to overtake Walmart as the largest U.S. retailer in 2022. That prediction is a product of the company’s reports based on data gathered during the heights of the pandemic. The pandemic certainly reaffirmed Amazon’s dominance in the online retail world.

At the height of the pandemic in 2020, around September, Walmart launched a new membership program that consolidates in-person and online shopping benefits. This service is Walmart’s equivalent of Amazon Prime. The benefits are very similar, including next day delivery and unlimited free delivery. But does Walmart Plus have the “it” factor that can rival the Goliath that is Amazon?

Will Walmart’s Ecommerce Rival Amazon?

To be frank, no. Amazon is still Amazon. When someone brings up ecommerce, the name Amazon is never far behind. The brand itself is synonymous with the industry. It’s founder and CEO is the wealthiest man in the world. Walmart is the biggest retailer in the United States with nearly 5,000 stores, but it has a long way to go to rival Amazon’s online presence.

Amazon Prime has been around for 16 years. In addition to services like Prime Video and Prime Music, the Amazon membership is firmly regarded as one of the most beneficial online services for the price. J.P. Morgan estimates that Amazon enjoys 39% of the e-commerce market in the United States as of 2020. That’s up from 24% in 2014. That growth likely contributes to other successes in the world of Amazon. The company is on track to “become one of the largest delivery companies” in the United States according to a report released by Bank of America in June 2021. The company will soon rival FedEx and USPS in terms of the U.S. transportation market.

What Exactly Is Walmart Plus?

Walmart Plus is slightly cheaper than Amazon Prime. Walmart’s new subscription service runs $98 annually or $12.95 monthly. Amazon Prime runs $199 per year or $12.99 per month. The new membership is a continuation of an incentive Walmart launched in 2019 called Grocery Unlimited. The main difference between Walmart Plus and Grocery Unlimited is that Walmart Plus offers far more than just groceries.

Some perks of Walmart Plus include unlimited free delivery, a scan & go feature, and fuel discounts. Customers can receive free, expedited delivery on groceries, household essentials, and other items that you can find in Walmart stores. That delivery can be as fast as the same day. The scan & go feature allows users to shop faster in stores. With the Walmart app, customers won’t have to go through traditional check-out. Customers can scan their items as they shop and pay on the app to get in and out of stores fast. Walmart Plus customers can save up to 5 centers per gallon at 2,000 Walmart, Murphy USA, and Murphy Express fuel stations. Sam’s Club fuel stations are expected to join the list of gas stations where you can save.

It’s hard to tell what the potential perks of Walmart Plus will look like in the future. What isn’t up to speculation is that the retail giant will try to rival Amazon for the lion’s share of the online retail market in the United States. The two companies price match each other constantly, fighting to take sales from the other. These points of competition are highlighted around the holiday season, especially on days like Black Friday. With Walmart unveiling Walmart Plus, prices are sure to get as competitive as ever.

Back To The Data

Amazon’s first quarter earnings report showed that there are over 200 million Prime members worldwide. Walmart has a long way to go if they ever hope to catch up with Amazon Prime’s membership numbers and sales. Amazon accounts for 38% of online sales in the United States, the most of any online retailer. Walmart comes in second but is very far behind. Walmart accounts for just 5% of online retail sales in the United States. Walmart’s hope is that Walmart Plus begins to chip away at that difference.

Walmart has tried in the past to rival Amazon’s dominance of the online retail market to no real success. In 2015, Walmart launched ShippingPass. The service was an online shipping service that ran users $50 per year with guaranteed deliveries of three days or less. Amazon Prime, at the time, cost $99 per year. In 2017, Walmart reconfigured the service. The membership fee was replaced with 2-day free shipping on orders of $35 or more.

Walmart really tried to seriously get into the arena with Amazon to battle over online sales in 2016. Walmart purchased Jet.com, an ecommerce startup for $3.3 billion. Walmart’s corporate offices hoped the sheer size of Walmart and the design of the startup would attract a younger and more affluent clientele. Ultimately, their goal was to stifle Amazon’s growth. The acquirement was unsuccessful, as Walmart discontinued the Jet.com brand in May 2020. Walmart has done the same with other online brands, including menswear brands and home décor brands. While some of them have been costly failures, they’re all an attempt to eat up more of the market that Amazon doesn’t have complete dominance over.

With all of Walmart’s efforts to rival Amazon, most have been to little avail. Walmart still hasn’t turned a profit with online sales. Consumers still associate Walmart as a grocery store and it’ll be incredibly difficult to alter the public perception of Walmart from anything other than that. That’s the idea behind Walmart acquisition of so many product-producing, ecommerce-driven companies. Unfortunately for the retail giant, Amazon is still the go-to for online shopping for the vast majority of American online shoppers.

Should Walmart Even Try?

All of this begs the question of whether Walmart should stay in their lane with physical shopping and online grocery sales. After all, it seems like their attempts to break into the ecommerce market will never rival that of Amazon. Sure, 5% of total online retail sales is a good deal, but what did Walmart have to invest to get that modest figure? Remember, Amazon holds the lion’s share of the online retail market at 38%. Walmart holds the second largest share, 33% behind Amazon.

Walmart, however, is the top retailer in the world with nearly $550 billion in sales in 2020. Amazon comes in second with a little over $260 billion in retail sales. From a pure economics standpoint, both companies are doing extremely well in their own lane. Amazon dominates online sales and Walmart dominates retail sales.

The likelihood that Walmart Plus will soon rival Amazon’s ecommerce sales is a far-fetched idea. Every previous attempt Walmart has made to overtake the online retail giant has resulted in very little, if any, profit for Walmart. That doesn’t mean Walmart Plus won’t be a giant success for the company and generate more positive sales revenue. This is where language is important. The new Walmart membership program will likely be a success in the context of attracting more customers and turning more of those buyers into consistent customers. But, the goal shouldn’t be to overtake the biggest online retailer in the world with a new membership program.

Walmart is Walmart, and it always will be Walmart. Amazon is Amazon, and it always will be Amazon. They are the two biggest retail giants the world has ever seen. It seems like they’ve drawn their own lines in the sand in terms of how big they can grow. For Walmart, they’ve tried to expand their company by targeting a different demographic than the everyday Walmart shopper. Those attempts have been futile. And that’s where Amazon will always have the upper hand. Amazon is a trusted source to get just about any product under the sun for everyone, blue and white collar, low and high class. Walmart is the trusted go-to for grocery shoppers and everyday needs. The only stores cutting into Walmart’s profits are higher-end grocery stores like Trader Joes and local markets.

The short answer to the question of whether Walmart Plus will rival Amazon is and unflinching no. A new Walmart membership program will do very little, if anything, to throw a wrench in Amazon’s profits.