When Amazon reports earnings on Thursday (Feb. 2), Wall Street will be focused on how much earnings drop, and on whether revenues top expectations.
Layoffs? They’ll be under discussion too. So will AWS and the state of enterprise tech spending.
As the eCommerce giant grapples with a sales growth slowdown, and as consumers pull back a bit on their household spending, Amazon’s earnings may also signal where the firm will be focusing its efforts to capture a greater share of retail mind share and wallet share among increasingly price-conscious consumers.
That means, of course, going head-to-head more than ever against Walmart. Through the years, PYMNTS has traced the jockeying between Walmart and Amazon in segments as varied as electronics, furniture and apparel. At the latest reading, and through our proprietary research, PYMNTS has found that Amazon and Walmart each have about 7% share of overall consumer retail spending, and 3% of total consumer spending, respectively.
Drill down a bit, and the most immediate battleground, the one that is most likely to yield some gains (or losses) comes in the grocery segment. The chart below detail that as time has gone on, market share In grocery has been remarkably consistent. Walmart’s share is multiples above Amazon’s, at a respective 18% versus 2.4%.
Source: PYMNTS, U.S. Census Bureau Data
Promotions may win the day – and so will delivery. There are some signs that the competitive advantage has some headwinds, at least for now. In news reported just last week, Amazon is raising the amount Prime members must spend to get free grocery delivery. Effective Feb. 28, members must order $150 for free delivery from Amazon Fresh. For smaller orders, there will be three tiers of services fees: $3.95 for orders between $100 and $150, $6.95 for those between $50 and $100 and $9.95 for those under $50, according to Amazon’s website.
Promotions may be a determining factor here, since both Amazon and Walmart may feel a “pinch” from consumers’ easing enthusiasm for subscriptions. PYMNTS research found at the end of last year that grocery delivery subscriptions engagement showed a 4.5% sequential reduction in the third quarter of 2022 versus the second quarter.
Consumers, no surprise, are keeping a more trained eye on what they spend and where. But Amazon might be able to weather some headwind here, as we found that Amazon Subscribe & Save — which enables consumers to arrange for the future delivery of groceries and other products in exchange for substantial discounts — was seeing some prioritization versus other retail subscriptions. Apparel remains a discretionary purchase, of course, and here Amazon holds a commanding lead over Walmart.
In the meantime, separately, our data this week shows that a paycheck-to-paycheck economy now has made it so even a majority of the highest earners (those making more than $100K) are now, at best, making ends meet month to month. Some 46% of all consumers are unlikely to purchase expensive electronics this year, roughly two-thirds won’t buy expensive gifts. For Walmart and Amazon, then, the battles will be waged over household essentials.
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