Why Amazon Beating Walmart to Become Biggest U.S. Retailer is Just WRONG

Did you see the new report from research firm Edge by Ascential (is that even a real name?) that says by 2026 Amazon will overtake Walmart to become the largest retailer in the country?

I did…and I think it’s just plain wrong.

Edge by Ascential – hereafter known as EbA – says that in four years Amazon will have 14.9% market share, besting Walmart’s 12.7% share. Costco, Home Depot and Kroger will round out the top five but will be far behind in mid-single digit range. It also forecast that e-commerce will be just over 30% of the overall retail market by 2026.

OK, let’s take this from the top.

This past fiscal year Walmart sales in the U.S. were $470 billion, including its Sam’s Club subsidiary (together, the largest share of its overall $573 billion in global sales). Grocery accounted for more than half of its American revenue.

Amazon’s total retail revenues this past year were $342 billion, of  which $222 billion came from e-commerce and $17 billion from its retail stores (primarily Whole Foods). The balance, about $103 billion, came from third-party sales, all of this according to the company’s website.

So, do the math: it’s a $130 billion spread and it projects that Amazon will have to grow about $40 billion a year – give or take a few Prime dollars – for four years while Walmart will plod along at a growth rate of two to three percent each year.

EbA (kind of grows on you, doesn’t it?) goes even further and says Amazon will add more than $294 billion in retail sales, starting last year and going through 2026. That takes my $40 billion a year in sales jump and more than doubles it.

Am I the only one who just doesn’t think this all adds up? Consider these big suppositions:

• It seems to suggest that Walmart is going to go to sleep for the next four years and not continue to build out its e-commerce capabilities, particularly in grocery where its physical store network is an incredible advantage over Amazon. That’s just not going to happen.

• It further assumes that Amazon is going to get its physical store act together after close to a decade of stumbling through in-store concepts. Maybe Amazon Fresh is finally the answer but how long will it take to build out 2500 locations to match Walmart’s footprint? Not four years.

• It makes the assumption that e-commerce will continue to gain share and that is probably right. Will it be nearly a third of retail sales in just 54 months? That’s a lot to ask.

• What about acquisitions? Lots of people think Amazon is going to have to buy a big retail chain – Kohl’s always seems to top the list – to get up to physical speed. Even if they do that, that’s $16 billion in additional revenue, not exactly chump change but not the ticket to get them to the promised land. And would Walmart buy somebody? History suggests otherwise but don’t be surprised to see them develop another retail business internally, maybe in the deep discount grocery and/or general merchandise channel to go up against dollar stores, Aldi and Lidl. They’ve danced around this before but under CEO Doug McMillon they’ve gotten much better at execution more recently.

So, put together all of these what-ifs and I’m afraid I don’t come to the same conclusion as EbA. I do believe the gap between Walmart and Amazon will continue to get smaller and Amazon’s growth, as a percentage of its overall business, will probably outplace that of Walmart. But $300 billion in growth over a five-year period, essentially doubling the size of its current revenue?

That’s a stretch…a very long stretch.

American retailing history is full of leaders who have eventually faltered and been replaced. Think Woolworth, think Sears, think A&P, think Kmart.

Walmart may eventually join that infamous club…but it’s not going to happen by 2026.

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