Investing.com – Amazon (NASDAQ:), with a market share of nearly 40%, continues to dominate e-commerce in the US due to its attractive Prime service, which offers fast, free shipping and a wide range of products across its marketplace.
But despite Amazon's strong position, Bernstein analysts believe Walmart (NYSE:) has the potential to take the lead in e-grocery, leveraging its unparalleled scale and efficiency in grocery sales.
Walmart's focus on essential items, which make up nearly 70% of its sales compared to Amazon's 53%, positions the retailer well in the e-grocery sector. Although focusing on low-margin staples can be a challenge, Bernstein believes Walmart's strength in grocery is a critical advantage. The research indicates that grocery is the main area where Walmart can excel in e-commerce.
The report also compares the business models of other major retailers in the mass/club retail space.
goal (NYSE:) is known for its exposure to e-commerce transformations due to its discretionary product focus and labor-intensive store fulfillment model. On the other hand, Costco (NASDAQ:) has entered into a strategic partnership with Instacart (NASDAQ:) for same-day grocery delivery, avoiding the high costs associated with in-house fulfillment.
Bernstein also examines the balance between first-party (1P) and third-party (3P) sales among these retailers.
Amazon operates a hybrid model with a third of its gross merchandise volume (GMV) coming from 1P sales, while Walmart, Target, and Costco rely primarily on 1P sales.
According to Bernstein's analysis, retailers with larger three-way marketplaces, such as Amazon, are better positioned to increase advertising revenue and marketplace fees. Walmart's advertising revenue currently represents a low-single-digit percentage of GMV, but there is potential for growth in its marketplace and advertising segments.
“We believe WMT can catch up by growing its market but will likely not achieve the level of AMZN as WMT strikes a balance between maintaining its e-grocery stronghold and growing its more profitable 3P business,” analysts led by Zhihan Ma said in a note. .
In general, analysts stress that the success of e-commerce, especially in the United States, depends on scale and the ability to manage high labor costs. Although Amazon leads non-grocery categories, Walmart's strong grocery organization, brand equity and extensive fulfillment network puts it in a favorable position to profitably expand into e-grocery.
“WMT’s brand value and price leadership in grocery, coupled with its extensive store footprint and execution capabilities, give the company the right to win,” analysts explained. “With grocery being a major traffic driver, WMT’s recipe for online success will be different than AMZN.”
They expect Walmart to continue to focus on 1P and grocery products and pursue growth in alternative revenue sources while exploring automation to reduce e-commerce costs.