Walmart’s Competitive Edge to Amazon

June 25, 2022

Walmart Challenges Amazon, Leverages Retail Infrastructure for E-Commerce

In recent years Amazon has spent millions building fulfillment centers across the country to allow for quick, same-day delivery to their customers. Walmart, however, already has a vast network of brick-and-mortar retailers positioned for delivery, which grants them a head start as they challenge Amazon for e-commerce dominance. Already, Walmart can reach 80% of the population with same-day delivery services. They are working to increase this percentage with drones, along with adapting more of their brick-and-mortar retailers to delivery centers.

Though Walmart has seen growth in this domain over recent years, Amazon is still the outright e-commerce leader. Amazon has 39.5% of the online market share in the U.S., compared with Walmart’s 7%, according to the research firm, eMarketer. Although Walmart’s e-commerce has increased, recent quarters have seen a steady decline in profits as inflation soars and more customers return to in-person shopping.

Despite current economic challenges and a steep climb to challenge Amazon for online market dominance, Walmart executives see a clear future in their e-commerce strategy, and continue to invest in delivery service expansion. Walmart plans to roll out its drone delivery services to 37 stores across six states by the end of 2022, reaching 4 million households. Even though drone delivery flopped with Amazon, Walmart sees an opportunity.

Walmart also plans to work more third-party sellers into Walmart Marketplace. Currently, Walmart offers delivery services to sellers and charges no monthly seller fees. Additionally, Walmart’s referral fees generally range between 8% and 15%, which are comparable to Amazon’s rates. Soon, Walmart will offer highly popular items sold on their Marketplace at physical Walmart stores – a prospect the retail giant hopes will attract more third-party sellers looking to build their businesses.

The goal, according to Walmart e-commerce chief Tom Ward, is to build trust with customers and allow customers to shop however they choose. Harvard Business School professor James Heskett sees Walmart’s omni-commerce strategy as a winning formula: it helps them both solidify their dominance in retail, expand their delivery reach, dodge inventory issues that choke Amazon today, and ultimately find an edge to compete with Amazon in e-commerce.