Amazon to pass Walmart as No. 1 retailer by ’24; the latter’s store-based tack is to blame

Amazon is expected to push past Walmart as the No. 1 retailer in the US by 2024, according to new report from Ascential. That news is hardly surprising to retail watchers, as Walmart bet on a store-based approach years ago. While that made sense at the time, consumers have changed their habits — and Walmart is about to pay the price.

The mammoth company — which today is not only the largest retailer in the US but the largest company in any category — had little choice at the time. With so much of its revenue coming from its 4,735 brick-and-mortar stores, e-commerce was seen as a way to extend that revenue, but to never replace it. (Globally, Walmart today commands 10,585 stores and employs some 2.3 million associates.)

The retailer more often than not has seen e-commerce as more of a convenience for existing customers, making minimal efforts to reach out beyond that. Contrast that approach with Amazon, which took the completely opposite tack. Despite having purchased the Whole Foods grocery chain as well as launching a few dozen Amazon Go stores, Amazon still sees physical stores as an afterthought. Its business model is built around online shopping.

Over the past 10 years or so, American consumers have gradually embraced e-commerce more each year — a trend that only accelerated when the COVID-19 pandemic arrived in 2020. Research firm Statista found that the e-commerce percentage of US retail sales has soared from 5.8% in 2013 to 16.1% today — and it’s projected to be 21.9% by 2025. As for the pandemic impact, the percentage of retail sales from from online shopping jumped from 11.1% in 2019 to 14.2% in 2020 — the highest year-over-year percentage increase seen in recent years.

“As the growth of online retailers has been accelerated by the pandemic, Amazon will continue to grow the fastest among the top 10, with an 11.7% CAGR between 2021-2026,” the Ascential report said, noting that Amazon is expected to add $294 billion in sales in the five-year priod ending in 2026, overtaking Walmart as the market’s largest retailer.

Ascential predicts that the top three retailers in the US will be Amazon, Walmart and Costco, with 14.9%, 12.7% and 4.4% of the market share, respectively.

The term “etailer” has fallen out of fashion in recent years, as the distinction between online and in-store sales has been fading into irrelevance. But not so with Amazon and Walmart. For very different reasons, they keep those distinctions nice and separate.

As though they live in parallel universes, both retailers use in-store and online in completely opposite ways. Walmart uses online to reinforce its store position. Amazon uses in-store tactics to reinforce its online app and site. Amazon Go locations are less about generating substantial revenue and more about showcasing technology that makes purchases frictionless. And Whole Foods is where many Amazon shoppers can go to return items bought online.

To be clear, dropping down a slot to become the second largest retailer in the United States is not quite a calamity. Walmart’s real estate footprint in the US, and its overall operations globally, mean it is not going anywhere for an extraordinarily long time.

But this change does make clear that Amazon is not only a market leader, but it is setting the tone for e-commerce operations everywhere.