Investing.com — Amazon (NASDAQ: ), with approximately 40% market share, continues to dominate U.S. e-commerce thanks to its attractive Prime service, which offers fast, free shipping and a wide range of products on its marketplace.
But despite Amazon’s strong position, Bernstein analysts believe Walmart (NYSE: ) has the potential to take the lead in e-commerce, leveraging its unmatched scale and grocery expertise.
Walmart’s focus on staples, which account for nearly 70% of its sales compared to Amazon’s 53%, positions the retailer well in the e-commerce segment. While an emphasis on lower-margin staples could present a challenge, Bernstein believes Walmart’s grocery strength is a defining asset. The research suggests that grocery is a key area where Walmart can outperform e-commerce.
The report further compares the business models of other major retailers in the mass/club retail space.
Goal (NYSE: ) is known for its vulnerability to changes in e-commerce due to its discretionary product focus and labor-intensive store fulfillment model. On the other hand, Costco (NASDAQ: ) formed a strategic partnership with Instacart (NASDAQ: ) for same-day grocery delivery, avoiding the high costs associated with in-home delivery.
Bernstein also examines the balance between first-party (1P) and third-party (3P) sales among these retailers.
Amazon operates a hybrid model with one-third of its gross merchandise volume (GMV) coming from 1P sales, while Walmart, Target, and Costco rely primarily on 1P sales.
According to Bernstein’s analysis, retailers with larger 3P marketplaces, such as Amazon, are better positioned to increase advertising revenue and marketplace fees. Walmart’s advertising revenue is currently in the low single digits as a percentage of its GMV, but there is potential for growth in the advertising sector as well.
“We believe WMT can catch up with the growth of its market, but is unlikely to reach the level of AMZN as WMT strikes a balance between maintaining its foothold in e-commerce and growing its more profitable 3P business,” analysts led by Zhihan Mao said in a note. .
Overall, analysts stress that the success of e-commerce, particularly in the US, is driven by scale and the ability to manage high labor costs. Although Amazon leads in non-grocery categories, Walmart’s strong grocery base, brand equity and extensive delivery network put it in a good position to expand profitably in e-commerce.
“WMT’s brand leadership and price leadership in grocery stores, along with a large number of stores and delivery options give the company the right to win,” the analysts explained. “Because grocery is a key driver of traffic, WMT’s recipe for online success will be different than AMZN’s.”
They expect Walmart to continue to focus on the 1P, food products, and continue growth in alternative revenue streams as it explores automation to reduce e-commerce costs.
