What does Amazon’s foray into brick-and-mortar mean for the industry? Can Amazon provide enough differentiation in a saturated market to “win” or even compete at the department store business?
The New York Times proclaimed in a headline on August 17 that “People Now Spend More At Amazon Than Walmart,” noting that this milestone was proof that “the online future has arrived. The biggest ecommerce company outside of China has unseated the biggest brick-and-mortar seller.” The article notes that while analysts assumed that this day would come sometime in the not-so-distant future, the pandemic-fueled boom in ecommerce expedited its arrival.
According to eMarketer, Amazon’s take from total ecommerce sales in the U.S. is nearly six times that of Walmart’s, with Amazon capturing “41 cents of every dollar spent online in the United States, while Walmart takes just 7 cents.”
Amazon’s marketplace sales dominate its online offerings, with third-party sellers doing more business on Amazon’s platform than Amazon itself does. Yet the advantages this model has over Walmart are clear— Amazon has no costs for manufacturing, inventory, or rent associated with 56 percent of the goods sold on Amazon. Presumably, Amazon will need to take on some of the same costs themselves when they open brick-and-mortar locations, which could potentially level the playing field a bit.