The battle for consumer check: an analysis of Walmart and Amazon
The analytic group PYMNTS conducted a new study and found that Walmart accounts for 8.9% of American spending on consumer goods. And in all retail categories, the company's figure is 2.8%. This is an impressive figure, but there is one thing.
On the heels of Walmart is the company Amazon with its shares of 6.4% and 2.1%. And, more importantly, the dynamics of changes in these indicators is clearly in favor of Amazon.
3r318. Comparison of consumer spending 3r3-319.
[i] Source: PYMNTS.com 3r330.
According to the findings of PYMTNS, further the difference between the companies will be reduced even more rapidly, given the percentage of Amazon purchases won back from Walmart in many of the key and most sought-after categories. Amazon’s investment is also supported by the company's investment in retail-related segments, partnership agreements and explicit plans to continue development in this direction.
Analysis of consumer checks
PYMNTS researchers first studied the data of sociological surveys in order to estimate the sum of expenses of the average American family for all categories of goods in 2018. PYMNTS study. conducted in conjunction with Visa, clearly demonstrated the attractiveness of voice systems. According to its results, almost a third of American consumers have at least one voice device, and 27% of them use it for shopping. Voice control systems are becoming more popular, and this factor will play into the hands of Amazon in the future, as Alexa expands its network.
As for Walmart, the company is completely dependent on the speed of popularization of Google voice assistant and his chances to win the voice race from Alexa.
For Walmart this is a serious reason to think.
According to the study, Walmart has already ceded its position to Amazon in categories such as clothing, electronics, as well as sports, books and music. In the home goods segment, companies are almost flush: 10.5% for Walmart and 9.7% for Amazon. The latter achieved these results thanks to a four-year expansion and the recent launch of the branded furniture catalog.
Ultimately, this rivalry of giants comes down to fighting for the title of the best company in the segments of food and health-related services. It is these categories that provide almost half (44%) of all consumer spending in physical stores.
Where will the main battle
Groceries for Walmart have always been the daily bread. But over the past four years, the share of Walmart in consumer spending in this segment has remained almost unchanged - 18.5%.
However, food products provide more than half (56%) of the company's sales, and in monetary terms, this figure is huge. It also includes acquisitions under the American Concession Purchase Program. According to some reports, Walmart is the main place where beneficiaries pay off their food stamps.
Walmart's top management, of course, is well aware that groceries and competitive prices are one of the main drivers of sales and sources of investment in innovation, ensuring that consumers return for shopping tomorrow.
For example, a relatively new opportunity for self-shipment purchases will soon be available in 40% of all chain stores in the US, and the acquisition of Jet.com helped Walmart to improve online grocery sales. In addition, the company's investment in partner services helped Walmart significantly improve logistics during the final stages of delivery.
From the graph it becomes clear why Walmart pays so much attention to groceries and groceries. And why Amazon, in turn, acquired Whole Foods. In order to somehow shift the situation in the grocery segment to its advantage, Amazon needed a network of offline stores with streamlined logistics and convenient, affordable delivery options.
Now the difference in the volume of grocery sales between the two rivals is huge.
There is one more thing. Although in all age groups the share of consumers who prefer to buy food and drinks online is growing, the profit in this segment does not always depend on going to offline or online stores. Restaurant services of ready-made food, weekly grocery sets and delivery contribute to the work of the market, forcing the giants Walmart and Amazon to adapt their offerings to modern realities.
In addition to food and beverages, the category of “health care and personal hygiene” deserves special attention, which accounts for 5.2% of consumer spending. And this number is growing. So far, Walmart is leading the segment, but Amazon is quickly shortening the distance.
Today, Walmart is the fourth in size 3r3-33199. pharmaceutical supplier
in the US with annual sales of $ 20 million. Sale of prescription drugs not only increases profits, but also attracts more customers to stores, which is why the average bill is growing.
Walmart invests in improving service and simplifying the procedure for buying drugs. The application of the retailer has become more adapted to the order of prescription drugs, and express-cash registers appeared in stores to speed up such purchases. There are 19 clinics in the retailer's network, which offer typical, non-urgent medical services.
Walmart has also been implementing programs for several years that motivate consumers to eat healthy foods and consult with doctors. For example, women participating in Medicaid and following a doctor’s schedule before childbirth receive certain medications at a more attractive price. There are similar incentives for other groups of patients, for example, those suffering from diabetes or hypertension. As the largest American employer, Walmart collaborates. with insurance companies to reduce the cost of health care and insurance premiums for its 2.2 million employees through the creation of similar incentive programs.
Amazon's deal with PillPack, whose annual profit is $ 100 billion, will not soon allow the company to approach Walmart's performance in this segment. But there is a reason why the total market capitalization of the largest suppliers of drugs fell by $ 13 billion after news of this deal. A similar fall, by the way, happened and with shares of the largest grocery chains, when Amazon announced the purchase of Whole Foods in June 2017.
Once the PillPack acquisition is completed, Amazon will have access to online sales of prescription drugs in 49 of the 50 US states. This creates a competitive threat to existing distributors, including Walmart, who is rumored to have long tried to achieve a similar deal with PillPack, but was refused every time.
The market reaction to the PillPack purchase news is linked to the expectation that Amazon will become a strong competitor by simplifying the online purchase of prescription drugs and offering delivery within one to two days.
Amazon, of course, also invests in other aspects of health care and products related to this area: from online sales of medical equipment to a joint venture venture with JPMorgan Chase and Berkshire Hathaway, aimed at revolutionizing the provision of medical services. At first, the pilot project will be launched only for its employees, and then, probably, it will become available for other volunteers.
Victory will be left to the consumer
Examining consumer spending in general and by category is an interesting way to see how Walmart and Amazon use their strengths and how they plan to increase the share of expenses that go to purchases in their stores.
Obviously, both companies understand that consumer preference will never be reduced only to choosing one or another channel of interaction. Rather, consumer sympathy will depend on which of the sites will provide the necessary goods with the least hassle for their purchase.
This trend is increasingly evident in product categories for which visiting a physical store was previously an important part of the buying process. To understand that significant changes in this segment have already occurred, just look at the share of Amazon in clothing and accessories or household goods.
For this reason, it is worthwhile to watch two large segments that can decide the outcome of this retail championship - groceries and health care. Pay attention to the investments of each company, aimed at improving positions in these categories, as well as the role that logistics will play. After all, both Walton himself and Jeff Bezos are well aware that the consumer is their boss, and that his word will be decisive.