AMZN vs WMT Weekly: For Top Retail Rivals, It’s All About the Seasonal Sandwich

After a nearly 90-day whirlwind of pre-season promos, holiday sales, product shortages, delivery constraints, and a stubborn spike in COVID counts, the peak retail rush is officially in the books, or as the Ink Spots sang in their 1947 classic; “It’s all over but the cryin’.”

The funny thing is, while there is always plenty to ‘mitch and bone’ about in the retail trade, when all was said and done, from a business standpoint, there wasn’t a lot to cry about. In fact, Holiday Shopping Season ’21 looks set to go down in the “Better Than Expected” column in the retail history books.

On a consumer level, however, the early anecdotal feedback is much more ‘Meh’ since retailers could hold the line on price on the inventory they had or simply tuned-out customer complaints concerning scarcity of selection over the inventory they didn’t have in stock. In the end, Q4 provided one collective ‘We told you so’ moment from the industry to any supply chain skeptics out there who didn’t have their Christmas shopping done before Halloween. (kidding…  sort of.)

Graphic Source: Yahoo Finance

Of course, with each company holding more than a 9% share of total U.S. retail sales, both Walmart and Amazon were not immune from these dynamics, and therefore should be in a position to report solid results when their Q4 earnings come out about 4 to 6 weeks from now.

Ahead of those numbers, the effects of investor pessimism concerning all of the aforementioned headwinds have weighed heavily on both stocks all quarter, and all year for that matter, with both Amazon and Walmart (shown in Blue and Green respectively above) sharply underperforming the benchmark S&P 500 Index (Red) not only for the past three months, but also for the past year.

The Seasonal Sandwich

And so, with the holiday season behind them and earnings season ahead of them, Amazon and Walmart currently find themselves sandwiched in between another perennial predicament —  returns seasons.

While specific returns data from the two titans is hard to come by, applying general industry dynamics and current retail trends to these 9% stakeholders would suggest that their stores and warehouses and, in some cases, dumpsters are currently filling up with unwanted merchandise.

Walmart has an advantage on the logistical processing side of this equation thanks to the existence of its nearly 5,000 U.S. locations where consumers can go and (quite likely) stand in line at a customer service desk with the rejected goods and a receipt and request a refund or exchange.

See also: Amazon Finally Matches Walmart for Consumer Retail Sales

Amazon, through the help of its 500-unit strong Whole Foods chain, can easily process some in-person returns via the in-store drop-off kiosks; the bulk of its Christmas rejects will be headed back to its 110 fulfillment centers scattered across the country.

From there, in both cases, products and payments enter a Matrix-like vortex of variables to decide if they’re worthy of being refunded, re-stocked and re-sold or simply retired and written off.

According to Tobin Moore, a “reverse logistics” expert and co-founder/CEO of returns management firm Optoro, it is not unheard of for companies to see return rates topping 30%, as this $100+ Billion annual holiday hangover wreaks havoc on retailers’ bottom lines, and increasingly so as the share of eCommerce purchases has eclipsed 21%.

Of Masks and Men

Seasonal sandwiches aside, Amazon and Walmart are always fine-tuning their portfolios and positions, and the homestretch of 2021 was not all that different than the rest of the year.

For starters, Amazon Pharmacy — the web giant’s largest push into the health care sector – turned one, marking a year of publicity and marketing surrounding the smattering of $1 prescriptions that it offers to Prime subscribers. That said, it looks as if Amazon is expecting more from its digital drugstore in year two, as it has recently installed Amazon Prime chief Neil Lindsay is the lead of Amazon Health, with oversight of everything from medical wearables to prescriptions.

For both companies, with some of the largest private-sector labor forces in the nation, the waning days of December will mark a sunsetting of sorts on the manpower front. While both have aggressively increased starting wages above state and federal mandated minimums, and also boosted benefits and offered select signing bonuses to fill certain positions, starting Jan 1st, more than half the country will enter a $15 per wage regime.

That will not likely cause either employer to have to make a lot of additional changes, but it very likely will do so to many of their slower-to-move workplace competitors. What that means is that the pay premium Walmart and Amazon had been offering to attract the hard-to-find workers they need will shrink or outright disappear, and in turn, make it less appealing to work in their locations compared to their rivals.