Walmart Loses Retail Crown To Amazon
With thousands of retail locations and an overwhelming online presence, Walmart has forged their name as king of retail… until now. So how did Amazon, with only warehouses and an aged web presence, convincingly overtake Walmart as most valuable retail establishment? Well, nobody really knows, but it happened last night in after hours trading as Amazon pocketed an unexpected $92 million profit, shooting their valuation north of $250 billion. If you’re keeping score, that’s $20 billion greater than Walmart.
Having passed the once insurmountable box store dynamo means the shift in shopping paradigm has certainly moved online, signaling a bright future for online retailers, but the stunning realization that physical store openings for Walmart will be fewer and farther between. Currently, digital commerce accounts for 7% of all U.S. retail revenues, which is roughly seven times what it was just 15 years ago. Amazon has been operating online since 1994, selling mainly books, while Walmart has been operating physical locations since 1962 and was incorporated in 1969.
Both retail giants are quite familiar with each other’s online business model.
Five years after Amazon launched its online marketplace, Walmart dove into the digital commerce space. Lee Scott, who quarterbacked Walmart in 1999, had invited Amazon founder Jeff Bezos into his Bentonville, Arkansas home to learn about online retailing in greater detail and to see if Amazon was for sale. Bezos offered to run Walmart’s online store. Nothing materialized, and the two eventually developed their presence into the epic battle of digital proportions consumers are witnessing today. Except it’s Amazon’s stock worth $550 per share in 2015, not Walmart’s.
Walmart’s saturation of U.S. Supercenters, during an era when more twenty- and thirty-year-olds are shopping online, has lent itself to declining digital profits. Amazon continually reinvests profits into operational improvements and product development, an area still infant to Walmart. In overall retail sales, Walmart continually rocks their competition, scoring $486 billion in 2014, nearly six times Amazon’s $86 billion in annual sales. The retail giant also employs 2.2 million people, which makes them the third largest private sector employer worldwide. Only the U.S. Department of Defense and the Liberation Army of China have larger payrolls.
Now that Amazon owns the retail market cap, Walmart must analyze their digital revenue machine to determine what products or services could push their cap back ahead of predictions. Amazon Cloud sales soared 82% year-over-year, while Walmart is ending overnight shopping at numerous locations and just purchased China’s Yihaodian, a digital grocery store founded in 2008. With Christmas sales expected to defeat last year’s totals, it’s Amazon sitting in the retail driver’s seat – for now.
(Photo by Justin Sullivan / Getty Images News)
