At the beginning of this year, a possibility was put on the table that drew the attention of both locals and others: Amazon would be four years away from overtaking Walmart.
A report signed by Edge by Ascential indicated that by 2025, US shoppers will allocate 632 billion dollars in products at Amazon and its affiliated retail stores, a figure that will exceed the 523 billion dollars projected for Walmart, according to the Edge report. by Ascential, which evaluated the value of all products sold by each company online and in stores with the exception of gasoline.
The truth is that this estimate seems to have fallen short and does not fully consider the impact that the pandemic undoubtedly had and the habits gained by consumers.
After nearly three decades and a health emergency that no one expected, Amazon became the world’s largest retailer outside of China.
This was shown by a report signed by The New York Times, which pointed out that Amazon sold more than $ 610 billion in goods during the 12 months ending in June, compared to Walmart’s sales of $ 566 billion recorded during the same period.
At this point, it is interesting to understand what is happening in the background, a scenario that proposes a long-term vision signed by Jeff Bezos for several decades, when the businessman already affirmed that the convenience of buying online combined with home delivery eventually would win.
The pandemic undoubtedly increased the chances of success of this premise. In the face of closed consumers and who made comfort a necessity to take care of their health, the Amazon model was undoubtedly an adequate solution planned since the birth of the e-commerce giant.
In 1999, Amazon patented the “1 click” functionality, which allowed it to create its empire and which consisted of allowing consumers to enter their billing, shipping and payment information only once and then buy everything they wanted with one click.
Amazon added to this the presentation of Amazon Prime, which by February 2005 was a one-of-a-kind proposal: For an initial payment of $ 79, customers were rewarded with delivery within a maximum of two days on all their orders. At the time, Amazon was charging customers $ 9.48 for two-day delivery, meaning that if only nine of these orders were placed in a year, Prime was already profitable for the customer.
The benefits of these actions are clear. In his latest letter as CEO to investors, Jeff Bezos, assured that 28 percent of purchases on Amazon are made in three minutes or less, and half of all purchases are completed in less than 15 minutes.
When making a comparison with the time it takes to make purchases in a physical store, this represents a profit for the customer of 45 minutes.
In this way, the calculation in time saved by the CEO of Amazon dictates that “if we assume that a typical purchase on Amazon lasts 15 minutes and that it saves us a couple of trips to a physical store a week, that represents savings of more than 75 hours a year ”.
Bezos’ projections have not stopped there, but he has ventured to deliver a projection measured in monetary value.
“In order to get a dollar figure, let’s value the time savings at $ 10 per hour, which is conservative. Seventy-five hours multiplied by $ 10 an hour and subtracting the cost of Prime gives us a value creation for each Prime member of about $ 630 (about 12,575 Mexican pesos). We have 200 million Prime members, with a total of 126,000 million dollars of value creation in 2020, ”the Amazon founder said in his writing.
The truth is that this has not been the only reason why, at least momentarily Amazon has overtaken Walmart.
The issue also responds to the difference in business models, which, although they will have to cross at some point, will make a difference in the immediate future.
Most of Amazon’s sales are generated by the more than 2 million third-party merchants who use its platform to sell themselves who pay an average commission of 15 percent on the value of each product sold.
For its part, Walmart grows in e-commerce but remains a traditional retailer that buys products from wholesalers to sell them for a higher price. That “interest” is earnings.
The truth and although Amazon may win, the reality is that this triumph over Walmart could be ephemeral and all because of the new generations that, although with a digital DNA, seems to be far from this brand.
According to Sitecore, Gen Z shoppers, who are roughly 15 to 25 years old, are more likely to feel guilty about shopping on Amazon and want to reduce their spending on the site.
Specifically, it is estimated that 53 percent of Gen Z shoppers want to reduce their purchases on Amazon, followed by 49 percent of Millennials, 36 percent of Gen X and 25 percent of baby boomers’.
This guilt has to do with the recent accusations around Amazon about the mistreatment of its employees, a situation that for the brand should not be despised if it really wants to permanently surpass Walmart.