Best e-commerce stock: Amazon or Walmart
Since 2020, Amazon (AMZN -0.79%) and walmart (WMT 0.23%) have seen substantial benefits from shifting consumer trends towards e-commerce due to the pandemic. However, the tailwinds of the pandemic for e-commerce have now turned into headwinds, and both are managing the negative financial impacts of COVID-19: high inflation, rising interest rates and the increased threat of a recession.
Although many people see Amazon and Walmart as a retail duopolyone of these giant retailers should do much better than the other in today’s market. Let’s see which company is the best e-commerce platform today.
1. Amazon is the largest e-commerce platform in the world
Amazon was among the first companies to sell products online, starting operations in Jeff Bezos’ garage on July 5, 1994. Thanks to its lead, the company has become the largest online retailer in the US market. The company has a 37.8% market share in the United States as of June 2022, according to consumer data firm Statista. Many assume that a Chinese website like Alibaba Holding Group is the world’s leading e-commerce player. However, Amazon takes the crown by far based on revenue generated, according to web application firm AxiomQ, which lists Amazon at $469.82 billion and second place. JD.com to $149.32 billion in revenue.
U.S. and global e-commerce markets have largely benefited from the surge in consumer spending during the pandemic. According to the Census Bureau’s annual retail survey, overall e-commerce sales in the United States grew by $244.2 billion, or 43% in 2020. Additionally, a recent survey by the consulting firm McKinsey showed that the increase in e-commerce penetration from March 2020 to March 2022 was 33%.
The best part is that the increase in e-commerce sales has hit a much higher baseline. For example, even after consumers return to physical stores in 2021, market research firm eMarketer released a report predicting that by 2023, global retail e-commerce sales will reach $6.2 trillion. and will represent 22.3% of total retail sales, up. $3.4 trillion and 13.8% in 2019.
Of course, as the largest e-commerce website, Amazon has benefited from these shifts in consumer preferences for online shopping. According to the company, since the start of the pandemic, its compound annual growth rate has been 25%, higher than its pre-pandemic growth rate.
2. Walmart has some advantages over Amazon
While Walmart is the world’s largest retailer, the company has primarily built its dominance on the back of its physical outlets. Its e-commerce brand started in 2000, but management didn’t take online retail seriously until it released weak sales forecasts in a 2015 quarterly earnings report. inflicting the stock’s biggest one-day drop in 25 years. Soon after, Walmart started investing heavily in e-commerce.
In 2016, Walmart acquired the booming e-commerce website Jet.com for around $3. billion in cash to learn more about the e-commerce industry. And while its e-commerce business didn’t look like much at first, in the first quarter of 2020, on the eve of the pandemic hitting America, Walmart’s US e-commerce sales began to percolate with 74% growth. By March 2020, Walmart had become the second-largest e-commerce website in the United States, according to eMarketer.
One of the significant advantages of Walmart’s e-commerce business over Amazon is that the company uses its 4,735 stores in the United States as warehouses for its online operations. Since 90% of Americans live within 10 miles of a Walmart store, it has a potential last-mile logistical advantage over Amazon’s 110 active fulfillment centers in America, which are much farther than a Walmart store. Additionally, Walmart can use its stores to buy online, collect in store (BOPIS). And while Amazon’s grocery segment, Whole Foods, has BOPIS capability, it only has just over 500 such stores in America.
Who will win in the current market?
The average annual household income of an Amazon shopper is $84,449, which leans more toward middle- and upper-income consumers. By comparison, Walmart leans more toward the low-income demographic, with an average annual income of $76,313. Since inflation hurts low-income consumers more than high-income consumers, Amazon has an edge in today’s inflationary market.
During Walmart’s second-quarter earnings call, management noted that the rising cost of food and fuel was starting to become a problem for its customers. In addition, the company reported a buildup of excess inventory due to the tightening of its customer belts. In contrast, Amazon management spoke of improvements in its key operating metrics, including better inventory levels. Amazon also noted an improvement in consumer demand.
Therefore, while both companies have winning long-term growth strategies, Amazon will likely perform better in this turbulent market environment.
John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a board member of The Motley Fool. Rob Starks Jr holds positions at Amazon. The Motley Fool has posts and endorses Amazon, JD.com and Walmart Inc. The Motley Fool has a Disclosure Policy.