Walmart vs. Amazon: Where Should You Sell?

Jordan McGee

August 16, 2021

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

Amazon’s popularity

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.

Amazon’s control

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.

Walmart’s growth

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.

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Improve Your Amazon Advertising Strategy With One Simple Metric: True RoAS
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Improve Your Amazon Advertising Strategy With One Simple Metric: True RoAS

The purpose of advertising on Amazon is simple: increase traffic and conversions. But the approach to get those conversions is not always so simple. Your Amazon advertising strategy is based on current ad data and performance results such as your return on ad spend (RoAS). 

At a minimum, your RoAS number tells you how well you’re maximizing your ad spend. The problem is the RoAS you’re getting from Amazon or an advertising agency isn’t always accurate. 

As a top 3P seller on Amazon, Pattern helps brands improve their Amazon advertising strategy and results by providing them with one simple metric: true RoAS.

Understanding True RoAS

To understand why true RoAS is helpful to brands, you need to understand how Amazon and other agencies calculate and present your RoAS.

The key to growing your brand and maximizing your ad spend is to drive incremental traffic, rather than cannibalizing what has already taken place. For example, if you are selling probiotics, and paying for sponsored ads to win the keyword “probiotics for women”, but also organically ranked in the top results with the same keyword, that’s cannibalization. The RoAS score you would receive from Amazon includes that level of cannibalism, which inflates the number, causing you to pay more on ad spend. The best ads drive incremental growth instead of cannibalizing organic sales. 

At Pattern, we’ve created the acceleration software to make sure brands are getting their “true RoAS”. Pattern’s patented tool applies artificial intelligence to advertising to maximize incremental growth or true return on investment. 

Our software helps brands optimize their efforts by providing live and updated information on where your brand is not organically ranking, and what you should be paying for. If your ranking improves in one area, the ad spend will automatically decrease for those words or phrases until the software detects a drop in ranking, signaling that your ad spend should go up again. This dynamic monitoring of ad spend will help you maximize incremental growth and improve your RoAS.

Improve Your Amazon Ad Strategy with Pattern

Knowing your true RoAS is key to improving your Amazon performance. Advertising agencies and marketplace account managers often give you an inaccurate RoAS ratio or value, which only incentivizes you to spend more on advertising, ultimately increasing revenue for the agencies and/or marketplaces.

At Pattern, a 3P partner on Amazon and other marketplaces, we view our brands just as that: a partnership. When you win, we win. You succeed on Amazon by maximizing your ad spend and we have the data and resources to help you do just that. Accurate, transparent data and reporting will help improve your advertising strategy to drive more traffic to and conversions on your products. 

Ready to finally get your true RoAS? Contact us.   

Slowing Inflation is Music to Consumers’ Ears
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Slowing Inflation is Music to Consumers’ Ears

**Instrument Pricing Changes Tune Amid Record Inflation** Compared to 2022, consumers should expect to pay more for musical instruments, but the rate of inflation shows signs of slowing. **The backstory:** America’s most popular musical instruments saw a notable price increase in 2022 compared to 2021, but the rate of inflation eased in Q4 ’22. **Why it matters:** Slowing inflation within this product category could indicate economic pressures like increased demand, rising labor costs, and supply chain disruptions are easing across the consumer landscape. **What we’re seeing:** The average cost of musical instruments increased 7.5% from 2021 – 2022; however, when analyzing individual increases year over year, some instruments saw price increases as high as 21%. <iframe title="YOY Price Change for Instruments — 2022 vs. 2021" aria-label="Bar Chart" id="datawrapper-chart-02Lwk" src="https://datawrapper.dwcdn.net/02Lwk/2/" scrolling="no" frameborder="0" style="width: 0; min-width: 100% !important; border: none;" height="379" data-external="1"></iframe><script type="text/javascript">!function(){"use strict";window.addEventListener("message",(function(e){if(void 0!==e.data["datawrapper-height"]){var t=document.querySelectorAll("iframe");for(var a in e.data["datawrapper-height"])for(var r=0;r<t.length;r++){if(t[r].contentWindow===e.source)t[r].style.height=e.data["datawrapper-height"][a]+"px"}}}))}(); </script> * Trombones experienced a 21.73% increase compared to 2021 * Trumpets +20.08% * Flutes +18.6% * Recorders +16.13% * Saxophones +13.63% * Clarinets +10.55% * Drums +5.41% * Ukuleles +5.17% **However:** Inflation among these same instruments was significantly less in Q4 ’22 compared to Q4 ’21. In some cases, prices decreased from Q4 ’21 – Q4 ‘22: <iframe title="Price Change for Instruments — Q4 2022 vs. Q4 2021" aria-label="Bar Chart" id="datawrapper-chart-6X6GZ" src="https://datawrapper.dwcdn.net/6X6GZ/2/" scrolling="no" frameborder="0" style="width: 0; min-width: 100% !important; border: none;" height="379" data-external="1"></iframe><script type="text/javascript">!function(){"use strict";window.addEventListener("message",(function(e){if(void 0!==e.data["datawrapper-height"]){var t=document.querySelectorAll("iframe");for(var a in e.data["datawrapper-height"])for(var r=0;r<t.length;r++){if(t[r].contentWindow===e.source)t[r].style.height=e.data["datawrapper-height"][a]+"px"}}}))}(); </script> * Trombones +11.23% * Flutes +10.41% * Saxophones +5.94% * Clarinets +5.59% * Trumpets +3.10% * Recorders +2.85% * Drums -2.59% * Ukuleles -8.46% **Moreover:** Certain instruments saw inflation reverse in 2022. On average, prices for melodicas, guitars, and violas saw their prices decrease by 4.41%, 3.19%, and 0.97%, respectively. <iframe title="YOY Price Change for Instruments — 2022 vs. 2021" aria-label="Bar Chart" id="datawrapper-chart-0Tefk" src="https://datawrapper.dwcdn.net/0Tefk/3/" scrolling="no" frameborder="0" style="width: 0; min-width: 100% !important; border: none;" height="259" data-external="1"></iframe><script type="text/javascript">!function(){"use strict";window.addEventListener("message",(function(e){if(void 0!==e.data["datawrapper-height"]){var t=document.querySelectorAll("iframe");for(var a in e.data["datawrapper-height"])for(var r=0;r<t.length;r++){if(t[r].contentWindow===e.source)t[r].style.height=e.data["datawrapper-height"][a]+"px"}}}))}(); </script> **Diving Deeper:** Inflation was more significant when comparing Q4 ’21 to Q4 ’20 than when comparing Q4 ’22 to Q4 ’21, indicating a slowing down of price increases for consumers. <iframe title="YOY Q4 Price Change for Instruments — 2020 – 2022" aria-label="Stacked Bars" id="datawrapper-chart-p6iqt" src="https://datawrapper.dwcdn.net/p6iqt/1/" scrolling="no" frameborder="0" style="width: 0; min-width: 100% !important; border: none;" height="206" data-external="1"></iframe><script type="text/javascript">!function(){"use strict";window.addEventListener("message",(function(e){if(void 0!==e.data["datawrapper-height"]){var t=document.querySelectorAll("iframe");for(var a in e.data["datawrapper-height"])for(var r=0;r<t.length;r++){if(t[r].contentWindow===e.source)t[r].style.height=e.data["datawrapper-height"][a]+"px"}}}))}(); </script> * In Q4 ’21, average prices for all instruments were up 8.89% compared to Q4 ’20. * When comparing Q4 ’22 to Q4 ’21, the average price for all instruments only increased by 2.65%. **The takeaway:** While consumers should expect to pay higher prices for instruments this year, overall inflation impact within this product category appears to be slowing down. With National Ukulele Day coming up on February 2, now is a great time for ecommerce brands to take advantage of slowing economic worries and reach new consumers. * Want Pattern’s data science team to power your brand with consumer insights like these? Contact us to [request more information](https://pattern.com/contact-us/) today.

Slowing Inflation? What Musical Instrument Pricing Tells Us
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Slowing Inflation? What Musical Instrument Pricing Tells Us

It’s safe to say consumers and brands alike are eager for a change to the pattern of rising inflation, steadily increasing in many ecommerce categories . Pattern’s internal team’s data scientists analysis of instrument pricing shows a glimmer of hope that inflation may be slowing, which would be great news for brands selling online.

At Pattern, we’re interested in and monitoring trends and news related to pricing since price is a key factor in a brand’s profitability (as explained in the Ecommerce Equation). When brands are able to optimize their price, conversions, and traffic, they can optimize their profitability. And profitability leads to better allocation of resources, better brand control, and gives leaders the ability to expand their presence to new markets worldwide.

YoY Instrument Pricing Increased at a Slower Pace

When analyzing the pricing changes of instruments from 2021 to 2022, our teams found that prices increased, but at a slower rate than from 2020 to 2021.

As shown below, the year over year Q4 changes show quite a lower rate of increase.

Inflation Improvements Raise Profitability

Because inflation impacts online shopping behaviors, lower inflation can lead to better overall profitability for brands. This idea, of course, is nuanced, but Pattern’s Ecommerce Equation can help illustrate the general principle.

When inflation rises, consumers change their spending habits. Shoppers spend more time researching products, forego premium, higher-priced brands, and buy more in bulk. Brands tend to see a loss of loyalty as they’re forced to raise prices.

Price is a key variable in the Ecommerce Equation: price x conversion x traffic = profitability. As inflation lowers, brands can expect better performance in all of these areas—more traffic as spending habits return to normal, higher conversion from returning customers, and price that better fits consumer demand. As inflation lowers and these variables stabilize, brands will see profitability increase.

Raise Your Profitability with Pattern

As an ecommerce accelerator, Pattern is obsessed with gathering data that helps our brand partners succeed. We’ve created best-in-class technology, models, and analytics to understand changes on the horizon and inform our decisions. With an incredible team of data obsessed Pattern employees, we see what makes the difference in truly great ecommerce performance and apply those learnings for brand partners. 

Ready to improve your profitability? Contact us here.