Walmart is Amazon’s only competitor. All the others are too small, too niche, or not a good replacement. A bigger Walmart means a better alternative to Amazon, which means a better e-commerce market.
Amazon dominates US e-commerce with a market share of approximately 40%. Walmart is far behind, with less than 10%. However, Walmart has grown faster than Amazon over the past five years because it started from a smaller base, the power of online grocery, and because it ultimately refocused on e-commerce in 2016 after letting Amazon grow unchallenged for decades . In 2023, it finally crossed the $100 billion mark in global e-commerce sales. Most of that was in the US
eBay remains the third largest e-commerce channel in the US. While total online spending has increased by 120% in five years, spending on eBay has only increased by 7%. After a decade of direct competition with Amazon in its early days, eBay currently focuses only on enthusiasts and collectors. Target is growing, but 70% of e-commerce comes from same-day pickup and delivery at stores, and in five years the market has only grown to fewer than 1,000 sellers.
Shopify surpassed $200 billion in annualized GMV in 2023. But according to comments during the Q4 earnings call, its marketplace-like app Shop does less than $1 billion per year (“In Q4, the Shop App reached almost $100 million in GMV in one month”). So Shopify is not a shopping destination with one shopping cart, but proof that direct-to-consumer works and is growing. For a few years, Google was trying to convert its price comparison engine into a direct-checkout machine, merging Shopify and other stores, but it stopped doing so in 2023.
Disruptors Temu, Shein, and TikTok Shop are the most visible, but only serve specific use cases, price points, and types of purchases. Each of them will inevitably seek to expand offering and price to grow beyond their original value proposition. While Shein’s success in apparel forced Amazon to reduce the fees it charges sellers, its efforts to add more categories are far less disruptive.
While shoppers have choices, third-party sellers who represent the bulk of Amazon’s revenue have few. Amazon is 80% of the market for companies that sell through marketplaces. eBay is the second largest marketplace, but its lack of growth is causing it to lose market share, and its focus on enthusiasts means it only works for certain categories. So Walmart has replaced eBay as the second most important channel and expanded the marketplace to over 100,000 active sellers.
Amazon’s seemingly infinite selection is what sells Prime memberships. It promises that it has something to offer regardless of the search query. There are cases when it is best to buy directly from brands, discover products from social networks on TikTok, find collectibles on eBay or buy an incredibly cheap USB cable on Temu. But only Walmart comes close to Amazon.
If Amazon had had meaningful competitors as it gained market share, they would have pushed it to invest more in store experiments and treat sellers better, which would likely have led to higher overall e-commerce spending than it does today. Walmart is that competitor. With $100 billion in online sales, finally in the same league as Amazon. It is still much smaller, but has invented fulfillment, marketplace and advertising.