How Walmart and Amazon can both win the retail sector

Competition between the world’s two largest retail giants is nothing new. For years, while Amazon became increasingly uncatchable at the top of the ecommerce industry, Walmart maintained its strong customer base and successful brick-and-mortar business model.

Cue the onset of the COVID-19 pandemic and a complete upheaval of the retail (and just about every) industry around the world.

Since 2020, both Amazon and Walmart have continually evolved their strategies to meet new customer expectations while adjusting to a world of constantly changing pandemic-driven consumer behaviors. And while the obvious assumption is that Amazon would come out on top thanks to their massive online inventory and quick delivery options, the outcome isn’t quite so cut-and-dry.

Instead, we’re seeing an omnichannel opportunity arise for both retailers in different ways. How are they embracing these opportunities with new strategies? Is it possible that Amazon and Walmart could find equal success alongside each other at the top of the retail sector?

In this interview, a former Walmart supply chain exec shares insights on how both Walmart and Amazon are approaching the future, who’s likely to win in what areas, and larger retail trends we can expect to see in the coming years.

Quick Takeaways

• Walmart’s strategy to compete with Amazon has evolved from trying to catch up on last-mile delivery to a new focus on leveraging their brick-and-mortar assets.
• Amazon could be close to pioneering a new retail trend: showroom-like store locations with online ordering and fulfillment.
• Walmart’s and Amazon’s disparate core customer bases could make it possible for both to coexist successfully at the top of the retail sector.

Catching Amazon on last-mile delivery: a losing battle

It’s no surprise that surpassing Amazon as the world’s largest retailer is at the top of Walmart’s priority list. After all, Walmart held that spot until just last year. The New York Times reported in August 2021 that consumers had spent $610 billion at Amazon in fiscal year 2020 compared to the $566 billion they spent at Walmart during the same time period.

According to this expert, Walmart’s original strategy to catch Amazon on last-mile delivery was a futile effort. But their approach has evolved more recently to instead capitalize on their own core competencies and resources.

“Walmart quickly realized that perhaps battling Amazon on its own playground of last mile delivery and being able to do that very rapidly to its consumer base may not be the way to really win. There was a need to unravel [that] strategy and we’ll see now, Walmart has consolidated a lot of its organizational structure and operations to an omnichannel mode, which is really leveraging the strengths of its asset base, which is 5,000+ stores.”

The pandemic presented timely new opportunities to do the latter. Omnichannel retail trends like buy online, pick up in store (BOPIS) — also called click and collect — saw a 106+% increase between 2019 and 2020. Walmart, which has a brick-and-mortar location within 5 miles of 90% of the United States population — was exceptionally positioned to lean into this trend.

And while it’s no Amazon, Walmart’s ecommerce Marketplace strategy continued to grow, from just 25,000 sellers in 2019 to more than 100,000 by August 2021. It’s gross merchandise tripled in 2020 compared to the previous year.

What Amazon’s brick-and-mortar play says about retail’s future

Interestingly, at the same time Walmart is expanding beyond their traditional brick-and-mortar business model, Amazon is making a play for more brick-and-mortar presence. Their Amazon Go stores launched in 2018 boasting their new Just Walk Out grab-and-go technology. Since then 23 locations have opened across four cities. 

This interview explored their newer initiative of taking over empty retail spaces — most recently, Sears — to create hybrid locations: part brick-and-mortar store, part fulfillment center.

“I think the intent in [Amazon] going after Sears locations or the other mall-based locations is a little bit different . . . I don’t think that Amazon’s intent is to necessarily bring the consumer into the stores in a way that Walmart has done over the years . . . I think they will be destinations in terms of them being showrooms of sorts but the actual trigger for the buyer or the actual ordering decision is likely going to be driven through the phone or some mobile device, or by the internet. I think the reason for Amazon going out to purchase all of this retail space is less for retail itself, but more for the ability to have a micro fulfillment center of sorts that is then able to reduce the cost of the last mile delivery.”

Could this be the route other retailers take? Will we see traditional retail stores become showrooms, where we visit to select items and then order using our smartphones? According to this expert, it’s likely.

“The forces are such that I think it’s inevitable that the shape and structure of the stores will change over time. I do think that largely, call it 50% of the store will still look and feel very similar, but I can see the remainder of the footprint in the store being converted into some form of mini distribution center, micro [distribution center] of sorts.”

How Amazon and Walmart can both win in the end

One of the most interesting insights from this expert interview is perhaps the idea that Amazon and Walmart don’t have to directly compete in every sense. Their loyal customers are different enough that they can coexist at the top of the retail sector, each serving a consumer base with different preferences and demands.

“I think each company begins to make some dent in the market share of the other, but I don’t think that trying to take over or make a sizable enough dent in the business model of the other would make a whole lot of sense . . . I think of Walmart as dominating middle and rural America and I think of Amazon dominating urban America and the coasts.”

Sales and revenue metrics will of course always declare a winner, but when it comes to Amazon vs. Walmart, neither retailer is driving the other out of business any time soon.

Access the full transcript for even more insights

Want to dive deeper into Amazon’s and Walmart’s competing retail strategies? Access the full transcript for this interview to learn more about:

• Walmart’s recent success at acquiring top retail talent through strategic M&A
• How Amazon’s transportation infrastructure has driven unbeatable last-mile execution
• Where Target falls in the competitive retail landscape

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