June 30, 2022

SEATTLE – According to company and industry data, Amazon has ousted Walmart to become the world’s largest retailer outside of China.

Fueled in part by rising demand during the pandemic, people spent more than $ 610 billion on Amazon in the twelve months to June, according to Wall Street estimates compiled by financial research firm FactSet. Walmart posted sales of $ 566 billion on Tuesday for the 12 months ended July.

Alibaba, the giant Chinese online retailer, is the global best seller. Neither Amazon nor Walmart are a dominant player in China.

In the race for Walmart, Amazon dethroned one of the most successful – and feared – companies in decades. Walmart perfected a thriving big-box model of retail that squeezed every penny out of its costs, lowering prices and beating competitors.

But for all that efficiency and performance, the quest to dominate today’s retail environment is won on the internet. And no company has made better use of that than Amazon. In fact, the company’s delivery (many items land on their doorstep in a day or two) and the wide range of choices drew shoppers to online shopping first and have since bought more and more there. It also made Jeff Bezos, the company’s founder, one of the richest people in the world.

“It’s a historic moment,” said Juozas Kaziukenas, founder of market research company Marketplace Pulse. “Walmart has been around for so long, and now Amazon is coming up with a different model, replacing it as the No. 1.”

Wall Street firms had expected this retail staff to change hands in the years to come. But the pandemic sped up the schedule as people stuck at home relied on supplies. Walmart’s sales rose sharply during the pandemic, but it hasn’t rivaled Amazon, which has added hundreds of new warehouses and hired about 500,000 workers since early last year.

Walmart’s sales rose $ 24 billion last year, the company said Tuesday. Around the same time period, the total value of everything people bought on Amazon According to analyst estimates, up nearly $ 200 billion.

While the numbers are calculated differently, analysts regularly use them as a rough comparison. Knowing the full value of Walmart’s sales is easy as they are almost all from its own inventory and are publicly announced every quarter. However, analysts need to compute an estimate of the value of Amazon’s total sales since most of the people who buy from the site are products owned and listed by outside vendors. The company only publically reports the fees it collects on these transactions.

With the success of Amazon, closer scrutiny has occurred. And the company has started receiving many of the same complaints about the treatment of workers and the impact on the local and national economies that Walmart faced during its largest expansion phases more than a decade ago.

“The big bad wolf is Amazon now,” said Barbara Kahn, a professor of marketing at the University of Pennsylvania’s Wharton School of Business, who has written several books on retail.

Amazon and Walmart declined to comment.

Very few companies have been able to claim the world’s largest retailer in the last century. The A. & P. was such a force that antitrust authorities pursued it in the 1940s. Sears overtook A. & P. as the largest retailer in the early 1960s, targeting medium-sized shoppers in the suburbs and expanding the department store model.

Then came Walmart.

In 1962, Sam Walton founded the retailer in the small town of Arkansas. Mr. Walton had “a real passion – some would say obsessive – to win,” he wrote in his autobiography, and he sold a wide variety of products at low prices, including fresh groceries, eventually. But his real innovation was building a huge logistics network that worked with such precision and efficiency that it wiped out many competitors who couldn’t keep up.

By the 1990s, Walmart had overtaken Sears. And then it continued to grow, opening thousands of stores and acquiring other retailers around the world.

Just like Mr. Walton founded Walmart when Sears rose, Mr. Bezos founded Amazon in the early 1990s when Walmart was king.

Guru Hariharan, who worked in Amazon’s retail store, said Amazon dwarfed Walmart by playing another game. Walmart has tightened its lockdown on physical stores and the grocery store. However, online shopping is growing much faster than in physical stores, despite the fact that it only accounts for about a seventh of US retail sales. Amazon takes 41 cents from every dollar spent online in the US, while Walmart only takes 7 cents, according to eMarketer.

“They have their own turf where they are the kings,” said Hariharan, who left Amazon and eventually founded CommerceIQ, which advises brands like Colgate and Kimberly-Clark on e-commerce.

Amazon rose in part because it opened its website to allow third-party sellers to list their products alongside items that Amazon itself buys and resells. This marketplace has significantly expanded the range of available items. Almost two million sellers offer products on Amazon and account for 56 percent of the items sold.

The marketplace makes it more difficult to determine the real influence of Amazon in retail. The company only tracks and reports the fees it charges sellers for listing, shipping, and marketing their goods, not the total amount that goes through its business. The model is more profitable, but generates less income.

“It makes Amazon appear smaller,” said Mr. Kaziukenas. “They hide their reality.”

This has led analysts at investment banks such as JP Morgan, BMO Capital Markets and Cowen to estimate what is known as “gross value”, which calculates how much customers buy from Amazon, regardless of whether it comes from the Amazon warehouse or that of a seller . The analysts make the estimates based on data released by the company, such as: FactSet creates and averages the estimates.

In the past 12 months, Amazon reported total sales of $ 390 billion. However, overall product sales, including third-party transactions, were up nearly 60 percent, according to analysts’ estimates.

Amazon hasn’t regularly disclosed its gross value, but in 2019, under antitrust pressure, Mr Bezos first announced the measure – then $ 277 billion at the time – to show that the third-party sellers were growing faster than Amazon retail direct sales. “Third party vendors are kicking us in the buttocks of first-time vendors,” he wrote.

When Mr Bezos testified in Congress last summer, he cited Walmart’s size as evidence of a competitive retail industry. “We’re competing with big, established players like Target, Costco, Kroger and of course Walmart,” he said, “a company that’s more than twice the size of Amazon” – presumably in terms of Walmart’s sales.

Walmart remains the largest private employer in the United States with 1.6 million employees. And it sells more than Amazon in the United States, although JP Morgan estimates Amazon will outperform Walmart in the United States next year.

During the pandemic, Walmart honed its ability to use its stores as mini-distribution centers where shoppers pick up their purchases “on the roadside,” a far more cost-effective way of fulfilling online orders than delivery. On Tuesday, Walmart said it expected total online sales of $ 75 billion this year. The company has stepped up its efforts to build its own marketplace, but the vast majority of its online sales still come from its own inventory, Kaziukenas said.

Edward Yruma, retail analyst and managing director at KeyBanc Capital Markets, said Amazon has only just begun to grapple with the reality of its size.

“Walmart is big and they know it,” he said. Amazon has long played the role of the upstart, even if it got enormous. It wasn’t until this summer, when the company was already employing around 1.3 million people, that it added a new leadership principle that recognized the responsibility of its size.

“We started in a garage,” begins the new principle, “but we are no longer there.”