It took close to three decades and a major pandemic. But for the first time ever, Amazon has dethroned Walmart as the world’s largest retailer outside of China.
According to a report in today’s New York Times, Amazon sold more than $610 billion worth of goods over the 12 months ending in June, compared with Walmart’s sales of $566 billion for the past 12 months.
Amazon’s ascent is the culmination of founder Jeff Bezos’s long-term vision that the convenience of shopping online combined with home delivery would eventually win out.
Let’s take a brief look at how the pandemic accelerated trends that were already in motion, and what business owners everywhere can learn from Amazon’s accomplishment.
Showing customers what they want, before they want it.
Bezos has long asserted that e-commerce was the way of the future. It’s one reason the company invested heavily in Amazon Prime, which focused on one-to-two-day delivery for a large selection of items.
In recent years, Wal-Mart also devoted huge funds into its e-commerce offerings in an attempt to compete with Amazon, while continuing to maintain a stranglehold on physical retail. Walmart’s hybrid model seemed to offer distinct advantages–like making it possible for people to see their products in person before purchase, or try on clothes to make sure they fit.
But then the pandemic hit.
Although many customers were willing to shop online and then pick up their goods from a physical store like Walmart, more and more people embraced the safety and convenience offered by Amazon–which offered more goods, delivered directly to the consumer’s doorstep.
Additionally, Amazon doubled down on its strategy, adding hundreds of new warehouses and hiring hundreds of thousands of new workers to keep up with anticipated demand.
In other words, Amazon went all-in with its vision, and it paid off.
Don’t hate the player. Change the game.
Walmart ascended to the top by perfecting its big-box model of retail. It built an extensive logistics network that and ran it like a Formula 1 pit crew, creating savings that it passed on to customers.
Instead of trying to compete with Walmart, Amazon focused on something completely different: making the online shopping experience as convenient as possible, so that people would actually prefer it to going to a physical location.
But beyond its focus on e-commerce, Amazon differs from Walmart in another major way.
Nearly all of Walmart’s sales come from its own inventory. Amazon also has a vast inventory, but its true success is dependent on third-party sellers who simply use Amazon as a platform to sell. Almost two million of these sellers list products on Amazon, and they account for more than half of all items sold (according to the Times report).
Amazon maintains less overhead, even produces less revenue–but it makes more profit.
And by changing the game in this way, Amazon has now come out on top.
So, what does the future hold?
Likely, as the current pandemic subsides, consumer behavior will continue to evolve.
But what about the next pandemic, or other world-scale event? What about advancing technology in the areas of virtual and augmented reality? Will these cause the gap between Amazon and Walmart to continue to widen?
Time will tell.
But one thing is for sure:
The world has changed, and there’s no going back.