Walmart, move over: Amazon is now the king of retail outside of China

Once upon a time, Sears was the biggest retailer in America. Then it was Walmart. Now, Amazon has become the largest retailer in the world — outside of China, at least. The e-commerce giant dethroned Walmart in the past year as more spending shifted online during the pandemic, though the shift was already inevitable.

A new report from The New York Times estimates that in the past twelve months, people spent more than $610 billion on Amazon. Walmart yesterday announced that sales topped $566 billion in the past year. The Times had to estimate Amazon’s sales because the company only reports the fees it takes from sellers, whereas Walmart reports the total sales amount of everything people buy.

Another interesting tidbit from the Times report is that Walmart’s sales grew by $24 billion in the last year, while the total value of everything people bought on Amazon rose by nearly $200 billion. That’s ten times the growth.

Flywheel — In recent years, Walmart has poured billions of dollars into trying to catch up to Amazon in online ordering. It had a lot of the ingredients it needed, too, like a vast distribution network and stores from which it could deliver goods to customers just as fast, if not faster, than Amazon. Customers can order curbside pickup and quickly grab their groceries on the way home, and make returns with ease. But despite all that, today Walmart accounts for less than 10 percent of e-commerce sales, while Amazon is around half.

Amazon’s special sauce is perhaps its flywheel effect. The company invests money in providing fast delivery, which entices customers to sign up — and more customers means more incentive for merchants to sell their goods on Amazon. The company then uses its commission from each sale and invests all of it right back into the circular process of making delivery faster and bringing in more customers. Services like free streaming video give people a reason to keep their Prime membership and ordering from Amazon, even if its prices aren’t always the best. Walmart doesn’t have that special combination.

The online future — Amazon still struggles in grocery, an area it’s been trying to crack because the $1.77 trillion market is too hard to pass up. Walmart remains the largest U.S. grocer with $288 billion in annual sales of perishables.

Either way, the news that people spend more with Amazon than Walmart is definitive proof that typing on a keyboard has won out over walking through a store. Whereas once Walmart was feared by local mom and pop shops, as they couldn’t compete with its scale and “everyday low prices,” now Amazon is the one to fear. Even if Walmart can be a bit faster than Amazon, when people realize they’re out of something they ultimately decide they can wait a day for it to arrive on their doorstep.

Amazon argues it’s a small percentage of total U.S. retail, but its dominance in e-commerce and its triumph over Walmart show that it can have a big influence over the fortune of sellers. Regulators are starting to circle, scrutinizing Amazon for potentially using data from its third-party sellers to create competitive products, and elevating its own in-house products in search results. There’s also its treatment of warehouse workers which plenty of legislators have taken issue with. If history is any indication, however, Amazon will probably withstand any legal troubles.