Walmart overtaking Amazon? Not so fast

  • Purchase frequency and even Prime membership at Amazon is declining, while Walmart is on the rise, according to a consumer study from retail analytics firm First Insight emailed to Retail Dive. In 2017, 80% of consumers shopped Amazon six or more times each month, but that has declined, to 49% last year and 40% this year, according to the report. Meanwhile, those shopping at Amazon twice a month or less has risen from 11% in 2017 to 33% last year and 39% this year.
  • Walmart is on the opposite trajectory, with the percentage of those making more than four trips there each month edging up from 58% in 2018 to 63% in 2019. And the study suggests that Walmart (stores, website or both) has become a preference over Amazon for a majority of U.S. shoppers: Last year 53% said they prefer Amazon, but just 45% said so this year. Walmart has flipped that, with 47% preferring it last year and 55% preferring it this year.
  • Prime membership has dropped after a steep rise: Last year 59% told First Insight they are Prime members, up from 49% the year before, but this year that’s down to 52%, according to the research, which was first reported by CNBC.

Dive Insight:

These numbers seem bad for Amazon, and really good for Walmart.

“Amazon is no longer the only game in town when it comes to free, fast shipping and an extremely broad online assortment,” First Insight researchers said in an email to Retail Dive. “Fast shipping alone is not sufficient for building and sustaining customer loyalty.”

The e-commerce giant’s membership increase last year to $119 annually has tempered growth, those researchers also said.

But Jon Reily, VP global commerce strategy at Publicis Sapient, said that the raw numbers offered by the analytics firm are open to interpretation, and in some cases could actually indicate a boon for Amazon. Without knowing Average Order Value, for example, the drop in shopping frequency at Amazon could mean that shoppers are stocking up more with each visit, he said.

“One of Amazon’s largest expenses is shipping costs, so if they could find a way for people to buy as much or more stuff but do it less often then that would be a huge boon for the company,” he told Retail Dive in an email. “On the surface this looks like the number of average purchases per month is normalizing at around 4x, and that could just as easily be explained by the success of Subscribe and Save or Amazon Pantry.”

In scrutinizing consumer preference for either retailer, it would be important to know which categories are involved, Reily also said. “If grocery, then I’m not surprised. Walmart has been killing it in both online as well as in-store and [buy online, pickup in-store] grocery over the last four quarters,” he said. “This number to me, while it could indicate something is shifting, is more than likely an indicator that Walmart is doing things right rather than Amazon doing things wrong.”

That’s also true when it comes to the uptick in store visits at Walmart. “Nearly 90% of retail sales still take place in the real world, and Amazon is responsible for only 4% of total retail sales across the board,” he said. “If you correlate it to the number above I can see where it could be interpreted to indicate a trend, but it’s not a scientific study by any means.”

First Insight, in its email to Retail Dive, said that “Walmart’s innovation strategy is clearly different from that of Amazon,” noting that Amazon has mostly developed its own new technologies, while Walmart’s has involved “acquiring key players and technologies [that] is enabling them to move quickly to get hyper-connected to the younger, more affluent generation of millennial consumers.”

Examples of that, First Insight said, include Walmart’s acquisitions of digitally-native brands like Jet, ModCloth and Bonobos. But the retail giant, which has sold ModCloth and scaled back Bonobos as well as Jet, could be backing off from that approach. First Insight’s report does show that Walmart is advancing nicely, Reily said. But Amazon also continues to enjoy a level of growth that supports its ambitions.

“Amazon’s revenue is predicted to have a nearly 20% [compound annual growth rate] through 2020. Revenue doesn’t equal profit, but it does give the eCommerce giant a lot more capital to play with when it comes to making Prime as attractive as possible,” he said. “Between removing the monthly cost of Amazon Fresh deliveries for Prime members to reducing shipping times to 1-day nationwide, it seems like now is a pretty good time to be a Prime member, and that attrition is likely not as large as indicated here.”