Welcome to CrossDock,

In this edition, we’re deep-diving into Amazon and Walmart's fierce e-commerce showdown. We’ll take you through their origins and key moments in this battle, assess their current positions, highlight key acquisitions, and speculate on the future of these retail powerhouses.

Clash of the Titans

Amazon vs Walmart - Who’s winning the e-commerce battle?  

Business rivalries often make great stories. Packed with drama, ambition, and high-stakes showdowns, they almost give you the thrill of a blockbuster. Think of Apple and Microsoft, two tech giants locked in a battle that shaped the digital age, or the fierce competition between Ferrari and Ford that fueled one of the greatest showdowns in automotive history. 

When it comes to e-commerce, Amazon and Walmart, two heavyweights of the industry, are now vying for supremacy. This rivalry is back in the spotlight with Walmart’s new Multichannel Solutions program that lets sellers use Walmart Fulfillment Services to handle orders from any e-commerce platform, including Amazon and Shopify. It’s seen as a direct challenge to Amazon’s Multi-Channel Fulfillment service, which similarly allows sellers to leverage Amazon’s vast logistics network to fulfill orders from various platforms. 

With the competition for e-commerce dominance intensifying, we think now is the right time to dive deeper into this fierce rivalry between two of retail’s biggest powerhouses. Let’s first take a look at the origin stories of Amazon and Walmart to understand how their distinct beginnings set the stage for the battle we see today.

The genesis 

In his 2011 commencement speech at his alma mater, Princeton University, Jeff Bezos famously said, “In the end, we are our choices.” And if there’s one company that embodies this statement, it’s the very one he built. What started in 1994 as an online bookstore in his garage in Bellevue, Washington, was just the beginning. Bezos made the bold choice to transform Amazon into an "everything store," a vision that pushed the company to expand rapidly beyond books.

By the late 1990s, it added CDs, videos, and consumer electronics. Driven by an obsession with customer-centric innovation, Amazon redefined how people shop. Today, Amazon is an e-commerce powerhouse valued at over $1.4 trillion, commanding nearly 40% of the U.S. e-commerce market. 

On the other hand, Walmart began in 1962 as a discount store in Arkansas and has now grown into the world's largest retailer, generating $611 billion in revenue with over 10,500 stores worldwide. Known for its low prices and extensive store network, Walmart dominates brick-and-mortar retail and is now making strides in online retail. And at the core of Amazon's and Walmart's e-commerce battle is the race to deliver products swiftly and efficiently from warehouses to customers' doorsteps

Amazon’s e-commerce dominance 

It is no overstatement to say that good fulfillment strategies are the lifeline of e-commerce, and no one understands them better than Amazon. However, it wasn't always like this. In its early days, Amazon focused purely on enhancing the customer buying experience, with no plans to manage logistics and fulfillment operations. It partnered with various publishers and distributors to fulfill orders.

Whenever a customer placed an order, Amazon would notify the publisher or distributor to ship the book directly to the customer’s address. Its first official warehouse was in the basement of its building – a 200 sq ft windowless room that was once a band practice studio famously dubbed as the "Sonic Jungle.” And Amazon's early distribution was pretty basic. They kept books in that tiny, windowless room and packed orders on the floor using simple cardboard. The team often worked late into the night to keep up and would personally drive boxes to UPS or the post office to get them shipped to customers.

But, as Amazon diversified its product offerings, order volumes surged, logistical challenges such as delivery delays and capacity issues during peak seasons began to affect customer satisfaction. This prompted Amazon to establish its own fulfillment centers, giving it greater control over inventory, packing, and shipping. By managing these processes in-house, Amazon reduced its reliance on third-party providers, streamlined order fulfillment, and significantly improved delivery times.

Jeff Bezos recognized early on that fulfillment wasn’t just a backend operation—it was a key strategic pillar for Amazon’s success. He emphasized that innovation in logistics and fulfillment would be crucial for achieving cost efficiency and scaling the business. 

Riding on this philosophy, in 2006, Amazon launched Fulfillment by Amazon (FBA), which allowed third-party sellers to tap into its powerful logistics network. The program was introduced to help sellers offer faster shipping, improve customer service, and gain access to the benefits of Amazon Prime, which significantly boosted their sales potential. 

Amazon recognized the importance of third-party sellers in expanding its product range and created FBA to streamline the process of storage, packing, and shipping for these sellers. The program entails storing products in Amazon’s fulfillment centers, managing order processing, handling shipping, and providing customer service, including managing returns. By standardizing fulfillment for third-party sellers, FBA improved delivery speed, consistency, and customer satisfaction on the Amazon platform, making it a critical component of the company's logistics strategy.

Since its inception, FBA has grown exponentially, with millions of sellers worldwide using the service to reach a broader audience and provide faster, more reliable shipping. Today, over 70% of all Amazon sellers use FBA to power their operations, highlighting the program’s massive influence on the marketplace. Third-party sellers in the U.S. sold over 8,600 products per minute on Amazon in 2023, amounting to over 4.5 billion items for the year. The FBA program has not only revolutionized how businesses sell on Amazon but also solidified Amazon’s position as a logistics powerhouse, driving growth for both the company and millions of sellers worldwide.

Prime time

Another critical service that further cemented Amazon’s dominance in the e-commerce space is Amazon Prime. By offering expedited delivery speed (same-day, one- and two-day delivery) as part of its Prime membership, Amazon transformed fast shipping from a premium service into a baseline expectation for online shoppers. This shift compelled competitors to adapt or risk falling behind quickly. With over 200 million Prime members worldwide, Amazon’s promise of fast, reliable delivery remains central to its appeal, customer experience, and retention.

But how does Amazon make this possible? The answer lies in its strategic placement of fulfillment centers close to popular areas. Amazon operates nearly 175 fulfillment centers in the US. The network of fulfillment centers is a critical component of Amazon's logistics strategy, and it allows Amazon to handle a massive volume of orders and deliver at great speed. Add to this advanced technologies like robotics arms, drones, AGVs, AI-powered fulfillment centers, etc. 

While speaking of Prime, it is essential to highlight Amazon’s Seller Fulfilled Prime (SFP) program. Launched in 2015, it offers third-party sellers a unique opportunity to provide Prime shipping directly from their warehouses. This program combines the fast, reliable delivery that Prime is known for with the flexibility for sellers to manage their own inventory. 

However, in September 2020, Amazon halted enrollment for its SFP program, citing concerns that “SFP was not providing the same high-quality experience that customers expect from Prime.” Many industry observers speculated that Amazon’s motives were more self-serving, believing the pause was intended to curb competition with its flagship FBA service.

But in 2023, under mounting scrutiny from the FTC for alleged monopolistic practices, Amazon reopened enrollment to the SFP program. As of 2024, participation in SFP has grown by about 21%, underscoring its rising popularity among sellers.

New contender

Amazon has everything to be a successful e-commerce business: a massive market share, a top-tier logistics and supply chain network, and a thriving marketplace. However, while Amazon’s dominance is hard to dispute, Walmart’s impressive growth in online retail is impossible to overlook. In the past few years, Walmart has made serious progress in e-commerce.

Believe it or not, all of this — the epic battle between Amazon and Walmart, the fierce competition in e-commerce, and Walmart’s remarkable comeback — is partly due to diapers. Yes, you read that right! 

The “Lore”

In 2016, to capture a bigger slice of the ecommerce market, which Amazon had been enjoying almost solo, Walmart made a crucial acquisition. By acquiring Marc Lore’s Jet.com for $3.3 billion, Walmart sent a clear signal that it was ready to take on Amazon head-to-head in the digital arena. According to experts, this decision was Walmart’s declaration to reshape its future and level the playing field in the e-commerce battle.

And Marc Lore was no stranger to e-commerce and Amazon. Years earlier, he had founded Diapers.com, a niche retailer that had gone toe-to-toe with Amazon. However, after relentless price wars and competitive pressures, Lore was forced to sell Diapers.com’s parent company, Quidsi, to Amazon in 2010. Noting this acquisition in detail, in his book The Everything Store: Jeff Bezos and The Age of Amazon, journalist Brad Stone wrote, “And insiders were once again left with their mouths agape, marveling at how Bezos had ruthlessly engineered another acquisition by driving his target off a cliff.”  

Interestingly, with its acquisition of Jet.com in August 2016, Walmart killed two birds with one stone. It had bought a promising platform with the potential to advance Walmart’s growth in online retail, and with it came Marc Lore, a seasoned entrepreneur with all the skills to take on Amazon and his Sensei (Quidsi founders idolized Jeff Bezos). Walmart CEO Doug McMillon saw in Lore the kind of innovative spirit that could breathe new life into Walmart’s online business, which had long lagged behind Amazon’s relentless expansion.

Lore was appointed CEO of Walmart U.S. e-commerce and spearheaded the reshaping of Walmart’s digital strategy. He’s often credited with inducing an entrepreneurial mindset into Walmart, which traditionally had a hierarchical structure. Lore championed initiatives like free two-day shipping without a membership fee to directly counter Amazon Prime.

He also expanded Walmart’s online grocery pickup service, turning Walmart’s brick-and-mortar stores into mini-fulfillment centers that gave the company a unique edge over Amazon. Under his leadership, Walmart’s e-commerce sales saw double-digit growth, revitalizing the company’s online business. 

While Lore’s tenure at Walmart ended in 2021, his impact on the company’s transformation was profound. He took Walmart from an online rookie to a formidable challenger, helped them deftly navigate the pandemic, and fundamentally altered how the company approached digital retail.

Catching up

Amazon’s edge in the market is largely driven by its fast delivery, and Walmart capitalized on its strengths to match that. With more than 4,700 stores and 600 Sam’s Clubs, Walmart is accessible to 90% of the U.S. population within a 10-mile radius. Walmart strategically leveraged this vast network of physical locations to enhance its omnichannel capabilities, seamlessly integrating online and offline shopping experiences. 

Additionally, by transforming its stores into mini-fulfillment centers, Walmart has been able to speed up order fulfillment, cut down on shipping costs, and offer flexible pickup options like Buy Online Pick Up in Store (BOPIS) and curbside pickup. These convenient pickup options quickly gained popularity and helped Walmart’s e-commerce growth. By 2023, Walmart’s curbside service had expanded to over 3,500 locations, with BOPIS available at nearly all of its U.S. stores.

Similarly, Walmart recognized that FBA was a key driver of Amazon’s e-commerce dominance, giving sellers access to efficient logistics and fast delivery. To counter this, Walmart launched Walmart Fulfillment Services (WFS) in 2020 as a direct competitor to Amazon’s FBA. WFS tapped into Walmart’s vast logistics network, providing sellers with an attractive alternative, especially with its lower fees, about 15% less than Amazon’s.

This competitive pricing drew in brands that had previously focused solely on selling through Walmart’s physical stores but were eager to expand into e-commerce. It also appealed to medium-sized and small sellers looking for a cost-effective fulfillment solution without compromising reach and quality. By offering a compelling alternative, Walmart positioned WFS as a powerful tool for sellers wanting to enter the online marketplace without being tied to Amazon’s ecosystem.

In addition, Walmart is expanding its product portfolio, diving into new categories like resale with its “Resold at Walmart” initiative, and strengthening its online grocery services. These moves are helping Walmart reach more customers and tap into emerging shopping trends, making it a more versatile competitor in e-commerce.

Strategic acquisitions

Acquisitions have played a crucial role in fueling the growth of both Amazon and Walmart, driving their competitive strategies and broadening their market reach. One of Walmart’s biggest acquisitions was the $16 billion investment in Flipkart, India’s leading e-commerce platform. With a burgeoning middle class, increasing internet penetration, and a rapidly growing digital economy, the country’s retail market is projected to surpass $1.3 trillion by 2025, potentially transforming India into a goldmine for companies like Amazon and Walmart.

For Walmart, acquiring Flipkart was a brilliant strategic move because it positioned them directly in a market where Flipkart has consistently outperformed Amazon. Flipkart holds a commanding lead over Amazon in India, boasting around 48% of the market share compared to Amazon’s 32%.

The next important Walmart acquisition in the Asian market was JD.com, one of China's largest e-commerce platforms. In 2016, Walmart acquired a 5% stake in the company. With this partnership, Walmart tapped into China's rapidly growing e-commerce sector, utilizing JD.com's robust logistics network to facilitate quicker deliveries and improve customer service. Over the next few years, Walmart increased its stake to approximately 10.8% to enhance its presence in the Chinese market. However, in August 2024, Walmart announced its decision to sell its stake in JD.com, valued at approximately $3.74 billion. 

Another significant example is Walmart's 2017 acquisition of Bonobos for $310 million. This move gave Walmart a strategic advantage in the online apparel market, a space where Amazon was gaining significant ground. Bonobos was known for its direct-to-consumer model and personalized shopping experience. The Bonobos acquisition gave Walmart a foothold in the premium men’s fashion segment, enhancing its appeal to younger, digitally savvy consumers.

When it comes to Amazon, the acquisition of Zappos marked a significant moment that redefined Amazon’s approach to customer service. Zappos had already earned a stellar reputation for its commitment to making customers feel valued, going beyond the typical online shopping experience. 

The company was known for creating memorable interactions, from agents who would spend hours assisting customers to surprising shipping upgrades and even guiding shoppers to competitors if Zappos was out of stock. It is worth mentioning that, under Tony Hsieh's visionary leadership, Zappos took customer satisfaction to the next level. Understanding that shoe shopping often involves trying multiple pairs, Tony added a groundbreaking option: customers could order as many pairs as they wished, try them on at home, and return the rest for free, keeping what fits perfectly.

This focus on building genuine connections with customers sets Zappos apart in the retail world. The acquisition of Zappos reshaped Amazon’s perspective on service, emphasizing that great customer care is central to retail success.

In 2018, Amazon made a strategic move to enter the healthcare market by acquiring PillPack, a digital pharmacy startup that simplified the process of managing medications for patients. This $753 million purchase marked Amazon’s official entry into the pharmaceutical industry and laid the foundation for what would become Amazon Pharmacy. Other significant Amazon acquisitions that have helped the company immensely include Whole Foods, Kiva Systems, Ring, etc.  

The bad and the ugly 

Amazon’s rise to e-commerce supremacy hasn’t been without controversy. While it has revolutionized the shopping experience and set new standards in fulfillment, its aggressive business tactics have also drawn criticism and legal scrutiny.

Let’s begin with Amazon's ever-changing and volatile fee structure. Its marketplace fees, including referral fees, fulfillment fees, and storage fees, have consistently increased over the years, cutting into sellers’ profits. Add to this the exuberant charges for long-term storage or seasonal inventory surcharges. If that’s not enough, Amazon keeps adding newer fees each year, like the inbound inventory placement fee, straining sellers' finances. Some sellers have reported that they are spending as much as 50% of their product’s selling price on Amazon fees.

Next up is Amazon’s stringent rules and complex guidelines. From product listing standards to inventory management requirements, failing to comply with Amazon’s strict policies can lead to expensive penalties, suspensions, or outright bans, often with little recourse for the seller. 

Another point of contention is the Buy Box, Amazon’s coveted space on its webpage, which drives the majority of sales. Many sellers allege that Amazon’s algorithms favor its own products or those of preferred vendors, making it harder for third-party sellers to compete. Reports of algorithmic manipulation, where Amazon allegedly uses its marketplace data to identify and replicate successful products, have further fueled accusations of unfair practices.

Amazon’s advertising platform has become a major revenue driver, competing with the likes of Google and Meta. However, many sellers feel that visibility heavily depends on ad spending. With fierce competition for top spots, sellers often feel pressured to pour money into ads, making it increasingly difficult to drive sales without paying for Amazon’s pricey ad placements. 

Such aggressive tactics haven’t gone unnoticed by regulators. The company faces increasing scrutiny from governments and regulatory bodies worldwide, accused of stifling competition and engaging in monopolistic practices. In recent years, Amazon has been the subject of antitrust probes by the European Union and the U.S. Federal Trade Commission (FTC). The EU has accused Amazon of using non-public data from independent sellers to unfairly compete with them, while the FTC has investigated the company for potentially using its dominant position to manipulate the marketplace to its advantage.

The winner is

While Amazon’s vast network of over 200+ fulfillment centers worldwide gives it a clear edge in speed and efficiency, Walmart’s fulfillment network is still catching up. Without any doubt, Amazon’s dominance is also reflected in market share, with Amazon controlling nearly 39.5% of the U.S. e-commerce market in 2023, compared to Walmart’s 6.7%. This vast difference highlights the challenges Walmart faces in expanding its online marketplace. 

Walmart’s stringent seller requirements for WFS, such as high-performance metrics and rigorous onboarding processes, have also limited the number of sellers on its platform. While these standards ensure quality, they also slow down the growth of Walmart’s marketplace, making it difficult to compete with Amazon’s more extensive and diverse seller ecosystem.

In Q4 2023, Amazon’s e-commerce sales kept climbing, with a year-over-year growth of about 12%, driven by strong Prime Day numbers and a thriving third-party marketplace. Meanwhile, Walmart’s U.S. e-commerce sales in 2023 reached $100 billion and grew at a solid 8%. Interestingly, Walmart dominated nearly 36% of all online grocery sales in the U.S. during the second quarter of 2023. While growing steadily, Walmart still has a long way to go in building a fulfillment network that can rival Amazon’s and expand its marketplace reach.

Amazon is leading the race with its strong logistics network and constant innovation, but Walmart isn’t going down without a fight. It’s clear that Walmart will keep pushing hard to ensure that this battle for the future of online shopping stays competitive.

Thank you for reading. We’ll see you at the next edition!

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