Amazon. Walmart. eBay. Target. Tmall. Mercado Libre. Rakuten. Zalando.
Each one of these ecommerce marketplaces comes with its own benefits, drawbacks, and business models that affect how sellers do business on the platform. Learning the ins and outs of so many platforms, and learning how to best scale your brand on each of them, can be a daunting task for even the most experienced ecommerce teams.
Below, we’ll take a look at two of the most prolific ecommerce marketplaces in the U.S.—Amazon and Walmart—and tell you everything you need to know to either establish or maintain your brand’s presence on the platform.
A brief history of Walmart vs. Amazon
While the first brick-and-mortar Walmart opened in the 1960s, Walmart didn’t step up as a strong competitor online until 2016 when it acquired Jet.com for $3.3 billion. With the Jet acquisition, Walmart suddenly had the resources and framework it needed to focus and expand its ecommerce efforts.
Walmart has seen consistent ecommerce growth since then, acquiring several more ecommerce businesses and building its ecommerce presence. In 2020, Walmart hit a milestone as it surpassed eBay for the No. 2 share of U.S. retail ecommerce sales. Walmart ecommerce grew 79% in the 2021 fiscal year, and year-over-year from 2020 to 2021, the Walmart marketplace saw triple-digit growth.
Despite Walmart’s rapid growth, the retail giant still trails behind Amazon. Jeff Bezos incorporated Amazon in 1994 and initially began its rise to ecommerce prominence by selling books. By the turn of the century, Amazon expanded its inventory to sell a wider variety of products, more closely resembling what consumers know as Amazon today.
Although Amazon didn’t turn a profit until 2001, Bezos spent years laying a solid foundation for the future of the company by convincing investors of the potential of Amazon’s model. Investors believed their investments in Amazon would pay off, and they were right. Amazon has revolutionized and dominated ecommerce sales and become the second-ever trillion-dollar company. In the last decade especially, Amazon has become increasingly profitable and pursued its goals even more aggressively.
How do Amazon and Walmart’s business models compare?
Despite Walmart’s efforts to focus on ecommerce, it’s still a brick-and-mortar first company. Walmart follows an everyday low prices model, meaning product costs are consistently low without sales or discounts. The mega-corporation scales volume as much as possible to translate lower costs into lower prices for consumers.
This model means that vendors in a 1P relationship with Walmart need to show up to negotiations with the lowest possible price. Walmart will end relationships with vendors holding unnecessary profit.
Amazon relies on a model that Bezos has referred to as the “flywheel” model. The goal is to build the best platform possible, and with that platform, attract the largest number of products, which will then attract more consumers, which in turn attract even more sellers and products. The flywheel naturally reinforces itself over time.
As opposed to Walmart, Amazon has a more diversified business model, thanks to Amazon Web Services and Amazon’s digital advertising services. Amazon’s technology and software infrastructure businesses have high margins that make their ecommerce business possible and profitable. While Walmart is growing its ecommerce operations from a perspective of scale to achieve profitability, Amazon has additional businesses that fund and support their ecommerce that make it possible for Amazon to compete on price.
Amazon and Walmart also slightly differ in the selling options they offer their vendors. Amazon essentially offers three options: 1P selling, 2P selling, or 3P selling. In a 1P model, vendors sell their products wholesale directly to Amazon and Amazon handles the rest. In the 2P model, also known as Fulfilled by Amazon (FBA), sellers own their products and sell them directly to consumers, but Amazon houses the products in its warehouses and fulfills orders. In a 3P model, sellers simply use Amazon as a platform to reach more customers and directly handle their own product fulfillment, pricing, and listings. Choosing between options like dropshipping and FBA is a decision each brand should make based on its products and shipping capabilities.
For the most part, Walmart’s selling models closely mirror Amazon’s, with Walmart Fulfillment Services directly competing with FBA. However, Walmart also offers an additional dropshipping option, in which Walmart handles the product listings, content, and pricing, but sellers hold and ship their own inventory. Giving sellers the convenience of a 1P model and control of a 3P model is unique to dropshipping from Walmart.
Walmart and Amazon’s audiences
Although brick-and-mortar Walmart stores tend to attract low-income shoppers, that trend doesn’t translate to ecommerce. Walmart.com and Amazon have similar customer bases—in fact, a 2020 survey found that 45% of Walmart+ subscribers also have an Amazon Prime account, and 19% of shoppers switched from Amazon Prime to Walmart+.
Amazon customers may tend to be slightly higher-income than Walmart customers simply because not all shoppers can afford Amazon Prime, which costs about $119 a year. While Walmart Plus also charges a monthly fee that comes out to about $98 a year, Walmart offers free 2-day delivery on many items even without Walmart Plus, making it more accessible for shoppers who don’t want to pay a monthly or annual fee.
Benefits and challenges of selling on Walmart vs. Amazon
Ultimately, Amazon is the most important ecommerce marketplace in the U.S. If you want your brand to succeed in ecommerce—and even in retail stores—you need to sell on Amazon. Amazon has become central to consumers’ lives, and selling on Amazon is critical for brands to stay relevant and profitable.
In part, this is because many consumers now use Amazon as a research platform. Even when consumers are shopping in a brick-and-mortar store, they use their smartphones to compare product listings and reviews on Amazon to better understand the options on the physical shelf in front of them. Amazon also offers options like Enhanced Brand Content and Amazon Renewed to make selling as simple and cost-efficient as possible.
Even though selling on Amazon is a good idea for virtually every brand, there are still some platform drawbacks for sellers. Amazon has worked hard to automate everything it can, which sometimes leaves sellers without support.
Amazon also forces you to equalize pricing across your channels, which can be a challenge if you can’t control what’s happening on all channels. If you’re in a 1P relationship with Amazon, for example, and want to sell your product on Amazon for $50 when it’s sold for $45 elsewhere on the web, Amazon will then lower the product’s price to $45 without your permission and make you pay the difference. If you’re in a 3P relationship with Amazon, Amazon can’t change your pricing, but it may turn off the Buy Box if your product is priced lower on other websites, still affecting your sales and profits.
With the rate of Walmart’s ecommerce growth, it’s becoming a necessity for brands to also establish a presence on Walmart.com. It’s almost universally a good idea to sell on Walmart’s marketplace. The one exception may be if you own a premium brand whose image may be tarnished by selling on Walmart, but even luxury brands should consider Walmart.com to grow their consumer base. If you already have a presence on Walmart, nurturing that presence will help you ride the wave of Walmart’s growth.
Another relevant benefit to selling on Walmart.com is protecting your brand from channel conflict. Having price parity and content parity across many marketplaces instills consumer trust in your brand. In an increasingly competitive ecommerce landscape, selling on Walmart.com also equips brands to better compete—if your item isn’t available on Walmart.com, you can bet that a competitor’s item will be available in its place. Considering the rate of Walmart’s ecommerce growth, these sales will quickly add up.
Data also shows that if a product is unavailable on Amazon, many consumers then search for the same product on Walmart.com. If your product is available on both platforms, your brand can still land the sale on one platform even if it’s out of stock on the other.
Walmart’s barriers to entry
While the benefits of selling on Walmart certainly outweigh the costs, brands should be aware that it’s a bit more complicated to start selling on Walmart compared to Amazon. Walmart’s seller application process is a bit more rigorous, and Walmart is picky with which brands it takes on as sellers. Since Walmart’s Seller Center is a new platform, it’s more complicated to use than Amazon’s Seller Central, and Walmart is still in the process of working out inconvenient bugs and quirks. Another upfront cost to consider is that Walmart, unlike Amazon, requires each product to have a UPC.
Once your brand is established on Walmart’s website, though, it’s fairly straightforward to maintain. Walmart lives up to its motto “by sellers, for sellers” and makes seller support fast and easily accessible. Unlike Amazon, Walmart gives its sellers same-day responses and any issues with the platform can typically be resolved within 24 hours. Additionally, unlike the costs of selling on Amazon, Walmart does not charge sellers any setup or monthly fees.
Where should your brand focus–Amazon or Walmart?
In light of all this information about Walmart vs. Amazon, where should your brand focus its efforts? The answer is both. Amazon is the most important ecommerce platform in the U.S. Walmart may generate a smaller portion of your revenue, but you can expect a higher percentage growth rate over the next several years since the platform is growing so rapidly.
There may be some products and brands that are better suited for one platform than another, but you can’t go wrong with selling on both the largest and fastest-growing ecommerce platforms on the web.
Need help establishing and maintaining your brand’s presence on Amazon and Walmart? Interested in what your unique brand strategy should look like? We’re here to help. Download our eBook: Selling on Walmart: Why You Should & Where to Start or get a custom demo to learn how we can grow your brand on ecommerce at no additional cost to you.