The Journal. - The Battle to Be the King of Retail: Walmart vs. Amazon

Episode Date: March 18, 2025

Walmart has been America’s largest retailer by revenue for over three decades. But that title might change hands this year, with Amazon hot on the supercenter’s heels. WSJ’s Sarah Nassauer explains how Walmart has fought hard to keep its crown.  Further Reading: -How Walmart Built the Biggest Threat Amazon Has Faced  -Walmart’s Reign as America’s Biggest Retailer Is Under Threat  Further Listening: -The 20,000 Steps to a Walmart Manager’s Six-Figure Salary  -What Walmart’s Aisles Say About the American Consumer  Learn more about your ad choices. Visit megaphone.fm/adchoices

There's like a genre of story that is the David versus Goliath story, but this is like a Goliath versus Goliath story. It's a Goliath versus Goliath story and everyone else suffers in some way. The two Goliaths in this story are the king of retail and the king of the internet, Walmart and Amazon. What are these two Goliaths fighting for? They're fighting for, you know, the dollars of the American consumer. That's our colleague Sarah Nassauer. And she says this year, Amazon could take Walmart's crown, a crown Walmart's held for more than

three decades, the nation's number one retailer by revenue. And is Walmart putting up a fight to keep its crown? Yeah, they are fighting for the king of retail title. I think that probably within Walmart, I can sense that there's been a shift from defining internally, culturally themselves as the country's largest retailer by revenue to the country's most convenient or most helpful retailer. I think there will be kind of an identity process, an identity shift when that that moment happens.

What will that mean for them? I mean, I think it, you know, you could look at it as super meaningful or not that meaningful. And there's arguments for both. But I think sort of culturally, internally and sort of psychologically, it is very meaningful. Bragging rights. It's bragging rights, exactly. Corporate America, I mean, being number one kind of matters. Yeah.

You know, there's, I don't know what it is about us humans, but we do like to think of ourselves in these types of competitions. Welcome to The Journal, our show about money, business, and power. I'm Kate Leimbach. It's Tuesday, March 18th. Coming up on the show, will Walmart lose its crown as the king of retail. When you started 10 years ago covering Walmart, what were you told you'd be covering? I remember that one of the editors who interviewed me to take that job described the job to me in terms basically as I would be covering

the slow decline of the king of retail. And that is kind of what I thought might happen. The slow decline of the king of retail of Walmart. That's right. To me, it's really interesting to have watched Walmart kind of get to this point and that they've actually been able to pull it off. They've actually been able to figure out a way

to deliver lots of the things that we kind of want in a daily weekly way, really, really fast. And really the last two years is when they made sort of a big leap to get there. How did Walmart become the king of retail? Walmart became the king of retail through probably ways that we think about as like traditional retail, right? Building lots of stores, selling things at a lower price, generally than lots of competitors, having a really broad selection.

So it made it really convenient to just go to one store and buy groceries plus, you know, socks and a broom or whatever. It all began in 1962 in Rogers, Arkansas with Walmart founder, Sam Walton. His mission was to have the lowest prices anytime, anywhere. Walmart's super inflation buster sale blasts through the inflation barrier with

big discount savings on hundreds of everyday items. By 1990, Walmart was the largest retailer in the US. It had boxed out smaller stores and redefined how Americans shopped. But then, the Internet happened. And Walmart got a new upstart competitor, which would change American shopping habits. Amazon. Founder Jeff Bezos envisioned a place where customers could quote, come to find and discover anything and everything they might want to buy online. Through the 2000s, Amazon built out a network of fulfillment centers, offered two-day shipping with Amazon Prime, and expanded its offerings by

allowing third-party sellers on its platform. The growing Amazon was a threat to Walmart. And in 2014, when Walmart named a new CEO, Doug McMillan, it was one of the many things on his plate. What was his mission? His mission was, you know, there were multiple things, but one big challenge was stores were in bad shape. Sales were not great, and the store experience was not that great.

Employees were grumbly. People didn't like their produce. They didn't think the prices were really that low anymore and Amazon was coming, right? And that wasn't even a thing that they had a true defense plan for yet. So McMillan started looking for ways to grow Walmart's online operation and one part of the company caught his eye. An experiment happening in Colorado. There was this tiny test at the time in Denver of an online pick-up and delivery grocery service. The idea was you ordered online and then you got your groceries delivered or you picked them up in the store parking lot. Walbert leaned into the pickup side of that.

This idea that you buy online and you pick up in a store parking lot. That was in part because that's a much more profitable way to sell online than delivery. You're driving to the store, you're doing part of the labor for them. This experiment worked. Within a few years, Walmart started offering online grocery pickup in a thousand stores across the country.

But they also knew, and there's a lot of data that shows, at the end of the day, shoppers want the most convenient thing, and the most convenient thing is, bring it to my house. We're selling these groceries at the same price online as you get in our stores. That's appealing to people. We have something there.

Let's build on that. So Walmart wanted to build out same day grocery delivery, but it wasn't easy. Setting up a delivery network was really hard for Walmart because it's so expensive and incredibly complex. There was experiments to see if their own store workers would be the delivery drivers. That created a lot of complexity as well. There were experiments and a lot of attempts to use third-party services, like the DoorDash, the Ubers of the world.

But these partnerships with delivery apps proved to be expensive and complicated. They led to abandoned orders, crowded aisles, and a chaotic patchwork of drivers. In those years, Walmart also bought an e-commerce startup called Jet.com for $3.3 billion. But it didn't work out as planned, and Walmart had to shut the site down in 2020. For Walmart, the war between the Goliaths was getting expensive.

Billions and billions of dollars. And I think probably, like on a deeper level, Amazon is such a clear threat. It was just internally over years getting through this, like, barrier of this is going to be expensive, this is going to be hard, you know, maybe we should have people do pick up, not delivery, right? All these internal debates, all of those challenges at some level, they sort of realize the board and executives. If we don't do these things, you know, we're going to lose big here. because, you know, we're going to lose big here. Coming up, how same-day grocery delivery is giving Walmart a fighting chance. Over the years, Walmart has identified one area where it could outfox Amazon. Grocery delivery.

More than 50% of Walmart's U.S. sales come from groceries, and its hope was that customers would come for onions and spaghetti and tack on other items with higher margins, like home goods, toys or clothes. Why does Walmart see fast grocery delivery as their edge? That's an interesting question because I feel like it's so illogical for Walmart to see fast grocery delivery as their edge. You know, you associate that with Amazon. I think Walmart sees low prices, having stores all over America very close to most people that live in the country,

and their giant grocery business as their edge. To achieve this dream of same-day grocery delivery, in 2018, Walmart launched an app with its own network of freelance drivers. They called it Spark, which is named after the yellow star logo of Walmart. The idea was that just like with Uber or DoorDash, these wouldn't be Walmart employees. These are folks that have the Spark app. They can decide whether to take a job and they pull up in the parking lot

and a Walmart employee loads up their car, or in some cases they go into the store and like shop the order and drive it to a customer's house for a charge, you know, Walmart pays them and then there's often a tip. Spark was working and more and more of Walmart's orders were delivered via the app. But the app had limitations,

namely in how it mapped out delivery areas for drivers. Spark started out using zip codes, but Walmart wanted it to be more precise. They worked on the mapping technology that they used to determine which areas they can route deliveries to. And that technology became more complex and they were able to integrate census data and will food spoil and will the driver want to drive that far, sort of more factors and use

instead of zip codes, kind of a pixelated map that allowed them to just sort of more factors and use, instead of zip codes, kind of a pixelated map that allowed them to just sort of get more granular and deliver to more places. Spark is now responsible for over 80% of Walmart's deliveries. And its stores, once considered the company's Achilles heel, have now become an asset. have now become an asset. Sarah, who 10 years ago thought she was on the inevitable decline of Walmart beat,

recently listened to the company's earnings call. She was surprised to hear that today, Walmart is able to do same-day delivery to 93% of American households. Why is Amazon struggling to compete in fast grocery delivery? Because food is tough. You know, fresh food is just tough to deal with. It's very low margin and they don't have grocery stores that have the same level of coverage.

So they have to build a fresh network, which is what they are doing rapidly right now that is delivery based. And they have had so many different models of trying to figure out how to both sell food that people want to eat and are willing to pay the price for, and then get it to people fast because they're a delivery company. That's just it's been trickier for them. They don't have that infrastructure that is not where they come from. Whereas that is where Walmart and like a traditional grocer, that it's just, it's been trickier for them. They don't have that infrastructure. That is not where they come from. Whereas that is where Walmart and like a traditional grocer, that's what they do.

But Amazon does have a national grocery retailer. It has Whole Foods. Yeah, I mean, Whole Foods is more expensive overall. And also there's only a few hundred Whole Foods stores in the country and they tend to be clustered around urban areas. There's 4,600 Walmart super centers, and they're everywhere. Unlike Walmart, Whole Foods has a more limited grocery selection. As a natural and organic supermarket, it doesn't sell brands like Cheerios or Doritos.

That presents the challenge because a lot of people, when they go grocery shopping, they might want to buy organic milk, but they also might want to buy Coke and they don't want to go to places to do that. And right now you can do that at Walmart, but you can't do it at Whole Foods. So one thing that Amazon is experimenting with is this idea of an Amazon, they call it Amazon Grocery. It's like a little store that's right next to the Whole Foods. And the idea is then you sort of have one location

you're going to get all your grocery needs met. After a decade long push, Walmart has a 9% share of US e-commerce sales. Amazon has 41%. And Walmart's online business as a standalone operation isn't profitable. How do they justify it? It's increasing sales and they're grabbing market share.

And they have to because Amazon is doing the same thing. They might lose their king of retail crown. Yeah, they might still lose their king of retail crown in the annual revenue sense, but they might also see market share slip and sort of be chipped away at in a way that I think a lot of people thought would happen 10 years ago. And in this war between our two Goliaths,

who's caught in the middle? In competing against each other, they've become so incredibly powerful that there are lots of other losers, right? And when Amazon and Walmart grow their revenue by X percent, it's so many more billions of dollars than when a smaller company does it that they're still taking market share from others. So if you were to place a bet on who's going to win in the clash of the Titans? You know, I feel like Walmart is so formidable as everyone who has sold to them or competed

with them knows. I cannot imagine a future where they're not, you know, a big player and a huge factor in what retail looks like in America. As someone who has followed the company for a very long time, fundamentally, I think one of the biggest issues is just the internal the internal tendency to move slowly because it's such a big place. But obviously Amazon is a company that is built around technology and e-commerce and AI and all these things that seem like they're going to be important in our future. And Walmart has a totally different history and like cultural corporate muscle. Before we go, we're interested in hearing from you.

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