A little more than a year ago, PYMNTS started tracking the race for the consumer’s whole paycheck between the two retail behemoths that have been expanding their respective ecosystems in the process: Amazon and Walmart. At the time, in November 2018, it became clear that the state of that race had changed.
Walmart was leading that race then, according to PYMNTS analysis, since it accounted for 8.9 percent of consumer retail spending in the U.S., and 2.8 percent of all U.S. consumer spending. Amazon was a close second, accounting for 5.8 percent of U.S. consumer retail spending, and 1.9 percent of all consumer spending in general.
Yet, as Karen Webster pointed out at the time, the story isn’t just in the absolute numbers, and who leads whom at any moment in time. Rather, it’s a story of whose stride is longer and faster — and that’s where the question of who leads whom gets interesting.
When using that as the quantitative metric for “winning the race,” PYMNTS’ internal analysis observes that Walmart’s share of the consumer paycheck has been relatively static for the last five years. It was 3 percent in 2014, and is 2.8 percent as of 2019 — PYMNTS’ 2019 numbers are historic, trailing 12-month numbers based on data from Q4 2018 through Q3 2019.
Amazon’s numbers, on the other hand, have been rapidly increasing with each passing year. As of 2014, Amazon’s total share of consumer spending was less than 1 percent, but is 2.3 percent as of 2019 data. Therefore, Walmart’s share of consumer spending is gradually slipping, while Amazon’s is steadily climbing.
“Based on our analysis, that spending share gap will close even more rapidly, given Walmart’s increasing loss of share to Amazon in many of the key categories that drive big chunks of consumer retail spending today,” Webster wrote, noting that Walmart has already ceded ground to Amazon in the clothing, electronics, sporting, books and music categories, while home furnishings is basically a tie.
“All of this makes the Walmart/Amazon rivalry over who will be the biggest, baddest retailer of them all about one, and only one, thing: Who will be the biggest, baddest player in grocery and health-related services?” Webster added.
The Grocery Wars
Amazon made many big grocery plays in 2019, one of the biggest being the ongoing expansion of free two-hour grocery delivery for Prime Members in more than 30 cities — which, as of late 2019, was widely praised by analysts.
“Amazon has been critiqued for not making full use of the Whole Foods acquisition, and this is about to change that,” said Juozas Kaziukenas, founder of New York eCommerce research firm Marketplace Pulse. “Having local stores act as two-hour delivery hubs is exactly why Amazon acquired the company.”
In related grocery delivery news, Amazon Fresh, the company’s online grocery delivery program that pre-existed Whole Foods, dropped its $14.99 per month delivery fee in favor of making Amazon Fresh a free benefit for Prime Members.
“Prime members love the convenience of free grocery delivery on Amazon, which is why we’ve made Amazon Fresh a free benefit of Prime, saving customers $14.99 per month,” said Stephenie Landry, VP of Amazon’s grocery delivery.
However, Amazon’s most eye-catching grocery announcement this year was the news that it intends to open a new Amazon-branded grocery store in the near (but unspecified) future in California. Not much is known about the project other than its location, that it will be a distinct offering from Whole Foods and it won’t use Amazon’s cashierless Go technology. At checkout, the more traditional checkout methods will rule.
“When it comes to grocery shopping, we know customers love choice, and this new store offers another grocery option that’s distinct from Whole Foods Market, which continues to grow and remain the leader in quality natural and organic food,” said an Amazon spokesperson, adding that more Whole Foods locations are forthcoming.
Amazon is clearly gravitating toward expanding its physical retail footprint, which is sensible, since Walmart’s physical footprint is roughly 10 times larger — with a Walmart store within 15 minutes of 90 percent of the U.S. population. When it comes time to go grocery shopping, there’s nothing like speed and convenience, something that Walmart is integrating across all the channels that consumers like to shop.
The story of Walmart and grocery over the last year has been dominated by news related to the digitization of its grocery business, making it more appealing to the omnichannel customer. Its curbside grocery-pickup program has been a breakout success for the company — and a main driver of its eCommerce growth during 2019. As of the end of this year, Walmart is aiming to have free curbside pickup available with 3,100 stores online.
“Our strength is being driven by food,” CEO Doug McMillon noted in his remarks to analysts after Walmart’s last earnings release, a sentiment backed by the fact that more than half of Walmart’s sales are driven by grocery purchases. Keeping and growing that core is, naturally, a key focus.
Last summer, Walmart announced the launch of the “Delivery Unlimited” subscription, which offers consumers the option of either paying $12.95 per month or $98 per year for a service that allows Walmart customers to shop online, and have their groceries delivered as often as they like. That announcement was followed by the launch of an in-home grocery delivery service for $19.95 per month that delivers groceries to a customer’s refrigerator (if they have the right smart garage door opener to give the delivery person access).
“It’s a service we plan to grow and scale aggressively,” said Walmart Senior Vice President of Membership and InHome Bart Stein. He added that the initial three cities chosen (Pittsburg; Vero Beach, Florida; and Kansas City) were picked because they represent many “factors across demographics [and] stores, and [operationally set] us up the best and quickest to scale nationwide.”
As of the end of this year, Walmart hopes to offer delivery from 1,600 stores. It seems clear that the retailer also hopes for this number to be much higher by the end of 2020.
A non-technological, but interesting, evolution to the race between Amazon and Walmart for the whole consumer paycheck is the degree to which that effort is increasingly expanding toward including every possible consumer. In April, both Walmart and Amazon announced that they, among a handful of other retailers, are participating in a one-year pilot program that will allow SNAP beneficiaries to use their benefit cards to buy groceries ordered online. SNAP is the federal program, formerly known as foods stamps, that provides financial assistance via an EBT card to help consumers buy food.
The pilot launched in New York state. The goal is to expand the program to the 38 million Americans currently enrolled in the SNAP program.
“People who receive SNAP benefits should have the opportunity to shop for food the same way more and more Americans shop for food — by ordering and paying for groceries online,” said Agriculture Secretary Sonny Perdue. “As technology advances, it is important for SNAP to advance, too.”
Walmart then did the program one better in June, and expanded its own in-house program to allow SNAP beneficiaries to use their cards to pay for online grocery pickup orders. Since Walmart cannot accept SNAP cards remotely online, customers are instead given the option to choose EBT as their payment method at checkout. When a customer arrives to pick up their groceries, an associate takes their card and scans it at the point of sale. The program is expected to be operational at all 3,100 Walmart grocery locations by the end of 2019 — Walmart first began developing the program in 2017.
As for the state of the race, Walmart has managed to hold on to its lead on consumer spending for food and beverage — with 19.5 percent of the market in the U.S., compared to Amazon’s 1.9 percent. However, given the foothold Amazon has grabbed in the market thus far, and its plan for expansion in 2020, we suspect it might grab up quite a bit more market share next year.
The Race For The Rx
The other area in which both Walmart and Amazon have assets to leverage is the healthcare space, where each have made big investments to capture what will inevitably be a growing share of the consumer’s paycheck.
Amazon’s 2018 acquisition of PillPack resulted in a more tightly integrated launch of PillPack in 2019, a launch that was somewhat sidetracked by the loss of access to patient data that it needed when CVS-owned Surescripts cut off ReMy Health — a data service that provides information to firms like PillPack — from access to its data. That issue remains ongoing, and will likely be settled in the courts in 2020, but it has dramatically slowed PillPack’s entrance to the market.
However, Amazon’s difficulties with PillPack didn’t stifle its attempts to enter the healthcare market. In April, Amazon announced that Alexa is now offering HIPAA-compliant skills.
“Every day, developers are inventing with voice to build helpful and convenient experiences for their customers,” wrote Rachel Jiang, head of Alexa health and wellness for Amazon. “These new skills are designed to help customers manage a variety of healthcare needs at home, simply using voice — whether it’s booking a medical appointment, accessing hospital post-discharge instructions, checking on the status of a prescription delivery and more.”
Amazon also rolled out a virtual healthcare clinic for employees, offering online primary care and non-emergency checkups, as well as prescription deliveries and in-home or in-office doctors’ visits. With the new program, called Amazon Care, employees and their families have the option to see a healthcare provider via a mobile app or website, and they can text a nurse on any health topic. If an employee needs follow-up care, a nurse will visit the patient at home. Prescriptions are delivered in hours, or can be picked up at a pharmacy.
Amazon employees who participate in the program can also receive routine medical care, such as vaccines, lab work, contraception and testing for sexually transmitted diseases, according to the Amazon Care website. The new service is part of Amazon’s push to deepen its footprint in the healthcare industry — and this pilot effort with employees is the first step in expanding the program outward.
Walmart has also been busy in its attempts to wade more deeply into the healthcare market. In the fall, Walmart opened what has been called its first “healthcare superstore” in Dallas, Georgia. The 10,000-square-foot center features an array of primary medical services, dental care and behavioral health services. The Walmart Health center expands upon the service menu that Walmart offers at the 19 Care Clinics it already operates.
“We are creating a supercenter for basic healthcare services,” said Sean Slovenski, senior vice president and president of health and wellness at Walmart. The larger Walmart Health center puts “key health services under one roof,” and is designed to be replicated in other locations — a second one is planned for Calhoun, Georgia in early 2020. Walmart has not confirmed that the model is targeted for national expansion, but Slovenski has said in the past that the new centers are a “serious” strategy and “not a dabble.”
In further expansion news, Sam’s Club announced plans this fall to partner with Humana and other companies, offering members in Michigan, Pennsylvania and North Carolina discounts on healthcare services, including primary care and dental services. The pilot program allows members in test states to purchase one of four bundles that offer savings on several services, including telehealth, prescriptions and family care medical services, among others. If the pilot program is successful, Sam’s Club Care Accelerator Together with Humana will be offered to all members.
By the numbers, Walmart still has the lead in the healthcare and personal care market — with 5.7 percent of consumer spending, compared to Amazon’s 2.5 percent, as of the halfway mark in 2019. Yet, once again, beyond the absolute figures, Walmart’s growth since 2015 has been largely flat, with Amazon consistently gaining ground. Look for more rollouts in 2020, as Amazon pushes to further narrow that gap.
Running Into Headwinds
Both Amazon and Walmart are running the race for the consumer’s whole paycheck, facing different road conditions and headwinds.
Amazon’s bigger issue in 2019 — and the one that will have the biggest impact on its future — has been the level of regulatory interest it has drawn, and the odds that such interest will force its breakup. Amazon is facing an investigation from the Federal Trade Commission (FTC) on its fulfillment service pricing, competition with third-party merchants and the bundling of services in Amazon’s Prime loyalty program. It is also facing a second investigation (alongside several other large Silicon Valley firms like Google, Apple and Facebook) about possible misuse of its market power by state attorneys general.
Amazon has said it is ready to withstand regulatory scrutiny, as well as work with elected officials on crafting fair rules for the tech sector.
“Substantial entities in the economy deserve scrutiny, and our job is to build the kind of company that passes that scrutiny,” said Amazon’s Worldwide Consumer CEO Jeff Wilke in a statement.
Walmart also faces challenges, as its big investment in eCommerce over the last several years isn’t paying off as quickly or directly as initially hoped. Online grocery ordering has been a big hit, McMillon noted in the last earnings report, but the rest of the business needs to log a stronger performance.
“We need even more progress on Walmart.com with general merchandise. We’re mixing the business out better to achieve better margin rates, but there is more work to do. We’re committed to progress and building a larger, healthier eCommerce business. Our customers want that, our marketplace sellers want that and so do we,” he said.
However, as 2019 comes to a close, it seems Walmart will be pulling back on that eCommerce focus in favor of refocusing on the supercenter location. That is a shift from the strategy announced a year ago at an investor meeting — McMillon reportedly displayed an image with eCommerce and stores laid out as more co-equal services for Walmart shoppers.
That news followed reports this fall that Walmart’s eCommerce operations posted a $1 billion loss in 2019, as Walmart has struggled to gain profitability from the various high-profile eCommerce firm buys it has made over the last several years. The retailer has also seen a few fairly high-profile departures in 2019. Bonobos Founder Andy Dunn announced that he would be exiting from Walmart in early 2020. There was also the departure of its U.S. President and CEO Greg Foran in late 2019 — reportedly after a period of strife with Walmart eCommerce President and CEO Marc Lore.
Walmart has, for the time being, sworn off any new eCommerce acquisitions — and has already sold off ModCloth, and announced that Jet.com will be integrated into its core eCommerce business. The focus at Walmart is clearly changing when it comes to eCommerce, and it will be interesting to watch how that evolves next year as it attempts to race the ranking 800-pound gorilla of U.S. eCommerce: Amazon.
In 2019, so far, Walmart accounts for 9.1 percent of consumer retail spending in the U.S., and 2.8 percent of all U.S. consumer spending — up from 9 percent of consumer retail spending in 2018, and level with the U.S. consumer spending share of 2018. Amazon accounts for 6.7 percent of U.S. consumer retail spending, and 2.3 percent of all consumer spending in general, up from 5.8 percent and 1.9 percent, respectively.
How that race continues to be run, and how each runner will run it, will be fun to watch. Walmart has noticed Amazon coming up fast in its rearview, and clearly started running a faster race — and, for the first time in almost a half-decade, 2019 appears to have been a year when they managed to slow their unbroken growth streak.
Of course, the final numbers for the year aren’t in yet, and Amazon did recently report a record holiday season. That is a long way of saying that there will be a lot to watch when we get back next year — and we look forward to keeping you posted.