The Way Walmart Is Outperforming Amazon
For the first time, Walmart is outperforming Amazon as its stock value increases and they are looking to hire over 40,000 workers at the same time Amazon is laying off workers and shares have plummeted by 43%.
In the local retail business, there’s no greater rivalry than Walmart and Amazon. They are the two biggest companies by revenue in the United States, and both are on track to surpass $500 billion in revenue at the end of 2022. But while the tech giant has been gaining market share on the big box retailer for years, things could be set to change in a big way.
Walmart’s stock has climbed more than 2% this year, while Amazon’s shares have dropped by 43%, Barrons reports. The e-commerce company is also said to be cutting approximately 10,000 jobs, while the retailer is hiring 40,000 associates for the holiday season. Moreover, the digital behemoth expects revenue between 2% and 8% higher in the fourth quarter, which is uncharacteristically slow for growth stock.
Unlike Walmart which anticipates a positive holiday shopping season, Amazon only expects a 6.6% to 12.6% revenue increase. The figure marks a significant slowdown from the 15% growth it posted in the third quarter. On the earnings call via The Motley Fool, CFO Brian Olsavsky explained the company’s financial struggles. He said the continuing impact of inflation, heightened fuel prices, and rising energy costs have impacted sales growth as consumers adjust their purchasing habits.
This gives Walmart an edge, as the big box chain specializes in selling consumer staples, not discretionary items. Additionally, groceries account for a majority of U.S. sales, and the store’s reputation for low prices draws in customers wanting to save money in tough times. These strengths encourage visits to its brick-and-mortar locations, where people are likely to purchase other items they need.
Moreover, management sees the looming recession as an opportunity to pick up market share by playing to Walmart’s strengths as a low-cost leader. The shift in the balance of selling power comes a few years after the so-called retail apocalypse which saw hundreds of malls and individual stores close. Although several stores operated by weaker players around the world shut down due to major competition, the prediction that all brick-and-mortar stores would eventually disappear was wrong.
This was evident during the pandemic when Amazon struggled to honor shipping commitments. As a result, big box stores like Walmart and other essential retailers leveraged their extensive network of physical stores to quickly fill orders. These locations went from being a liability to an asset, becoming de facto distribution centers that allowed for same-day curbside pickup. It also eliminated shipping costs as fuel prices soared. It was a complete reversal of the trend that previously dominated retail for years.
Ironically the global pandemic, which led more people to shop online than ever before, actually handed the greatest benefits to traditional stores like Walmart, rather than their e-commerce counterparts. However, the big box chain’s success is also due to several new business ventures. Those include its third-party marketplace, a savvy investment in Flipkart, and its Walmart+ subscription service.
Meanwhile, Amazon’s fall from grace is a reminder of how quickly the investing landscape and the overall operating environment can change.
