The Battle to Be the King of Retail: Walmart vs. Amazon

Summary

The Battle to Be the King of Retail: Walmart vs. Amazon Episode of "The Journal" by The Wall Street Journal & Gimlet
Release Date: March 18, 2025

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Introduction

In the March 18, 2025 episode of The Journal, hosts Kate Linebaugh and Sarah Nassauer delve into the intense rivalry between two retail titans: Walmart and Amazon. Framing their discussion as a modern-day "Goliath versus Goliath" battle, they explore how these industry giants are vying for supremacy in the ever-evolving landscape of American consumerism.

The Goliaths of Retail: Walmart vs. Amazon

Kate Linebaugh opens the episode by setting the stage for a colossal showdown. “[This is] a Goliath versus Goliath story,” she remarks at [00:05], highlighting the unprecedented nature of two industry behemoths competing against each other. Sarah Nassauer concurs, emphasizing the broader impact on consumers: “...a Goliath versus Goliath story and everyone else suffers in some way” ([00:15]).

The central question posed is clear: What are Walmart and Amazon fighting for? Nassauer succinctly answers, “[They’re] fighting for... the dollars of the American consumer” ([00:33]). This competition is not just about market share but also about defining the very essence of retail leadership.

Walmart's Path to Dominance

Walmart has long been the undisputed leader in U.S. retail, a status it has maintained for over three decades. Nassauer reflects on her decade-long coverage of Walmart, initially expecting to witness its gradual decline: “...covering the slow decline of the king of retail” ([03:14]). Contrary to her expectations, Walmart has demonstrated remarkable resilience and adaptability.

The company's ascent began in 1962 with founder Sam Walton, whose mission was “to have the lowest prices anytime, anywhere” ([04:06]). This commitment to affordability, combined with a vast network of stores offering a broad selection of goods, established Walmart as the go-to destination for everything from groceries to household items.

Amazon's Ascendancy and Challenges

Contrastively, Amazon, under Jeff Bezos, envisioned a comprehensive online marketplace: “a place where customers could... find and discover anything and everything they might want to buy online” ([04:42]). Throughout the 2000s, Amazon expanded aggressively by building fulfillment centers, introducing Amazon Prime’s two-day shipping, and incorporating third-party sellers into its platform.

However, despite Amazon's robust growth—now commanding 41% of U.S. e-commerce sales—Nassauer points out Amazon's struggle to penetrate the fresh grocery delivery market effectively ([13:06]). The company’s acquisition of Whole Foods provided some leverage, but its limited number of stores and higher price points compared to Walmart's extensive and diverse offerings pose significant challenges.

Strategies in the Online Realm

In response to Amazon's growing dominance, Walmart's new CEO, Doug McMillan, initiated strategic shifts to bolster the company's online presence ([05:59]). One pivotal move was the experimentation with online grocery pickup and delivery services in Denver, Colorado ([06:37]).

This initiative evolved into Walmart’s Spark app, launched in 2018, which utilizes a network of freelance drivers to facilitate same-day grocery deliveries ([10:56]). “[Spark] is named after the yellow star logo of Walmart...” explains Nassauer, detailing how the app integrates with store employees to streamline the delivery process ([11:06]).

The Grocery Delivery Battleground

Grocery delivery stands out as Walmart’s strategic advantage over Amazon. With over 50% of its U.S. sales derived from groceries, Walmart leverages its expansive network of supercenters—4,600 across the nation—to offer unparalleled delivery speed and convenience. Nassauer underscores this advantage: “...they have grocery stores that have the same level of coverage... whereas Amazon... doesn’t have that infrastructure” ([13:06]).

Walmart's focus on same-day delivery has enabled it to serve 93% of American households, a feat Amazon has yet to match due to logistical complexities and lower margins in fresh food delivery ([12:27], [13:06]). Additionally, Walmart's ability to offer a comprehensive grocery selection, including both organic and mainstream brands, contrasts with Whole Foods' more limited inventory ([14:09]-[14:20]).

Comparative Advantages

Walmart's entrenched presence in physical retail provides a logistical backbone that Amazon lacks. Nassauer notes, “Walmart sees low prices, having stores all over America... and their giant grocery business as their edge” ([10:30]). In contrast, Amazon's ventures into grocery, such as Amazon Grocery stores adjacent to Whole Foods, attempt to bridge the gap but face inherent limitations due to store scarcity and higher price points ([14:47]).

Moreover, Walmart's Spark app accounts for over 80% of its deliveries, highlighting the efficiency and scalability of its delivery network ([12:27]). This sophisticated mapping technology allows for precise delivery routing, enhancing customer satisfaction and operational efficiency.

Market Share and Financials

Despite Walmart capturing a significant share of the market, its e-commerce operations hold only a 9% share of U.S. e-commerce sales compared to Amazon’s 41% ([15:05]). Nonetheless, Nassauer argues that Walmart's aggressive investment in online services is justified by its potential to increase sales and capture greater market share, even if the online segment remains unprofitable as a standalone operation ([15:05]-[15:14]).

Conclusion: The Future of Retail Leadership

As the episode draws to a close, Nassauer reflects on the enduring strength of Walmart alongside Amazon’s technological prowess. “[Walmart] is so formidable... I cannot imagine a future where they're not a big player...” she states ([16:09]). While acknowledging Amazon's innovations in technology, AI, and e-commerce, Nassauer remains confident in Walmart’s foundational advantages rooted in its extensive physical presence and grocery expertise.

The battle between Walmart and Amazon exemplifies the high-stakes competition shaping modern retail. As both giants continue to evolve and adapt, the outcome of this clash will significantly influence the future landscape of American consumerism.

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Note: Advertisement segments from the transcript have been omitted to focus on the core content of the discussion.

Transcript

[Kate Linebaugh]

There's like a genre of story that is the David versus Goliath story, but this is like a Goliath versus Goliath story.

[Sarah Nassauer]

It's a Goliath versus Goliath story and everyone else suffers in some way.

[Kate Linebaugh]

The two Goliaths in this story are the king of retail and the king of the Internet, Walmart and Amazon. What are these two Goliaths fighting for?

[Sarah Nassauer]

They're fighting for, you know, the dollars of the American consumer.

[Kate Linebaugh]

That's our colleague Sarah Nassauer, and she says this year Amazon could take Walmart's crown. A crown Walmart's held for more than three decades, the nation's number one retailer by revenue, and his Walmart putting up a fight to keep its crown.

[Sarah Nassauer]

Yeah, they are fighting for the king of retail title. I think that probably within Walmart, I can sense that there's been a shift from defining like, internally, culturally, themselves as the country's largest retailer by revenue to the country's most convenient or most helpful retailer. You know, I think there will be kind of a identity process, an identity shift when that, that moment happens.

[Kate Linebaugh]

What will that mean for them?

[Sarah Nassauer]

I mean, I think it, it, you know, you could look at it as super meaningful or not that meaningful, and there's arguments for both. But I think sort of culturally, internally and sort of psychologically, it is very meaningful.

[Kate Linebaugh]

Bragging rights.

[Sarah Nassauer]

It's bragging rights. Exactly.

[Kate Linebaugh]

Corporate America, I mean, being number one kind of matters.

[Sarah Nassauer]

Yeah, you know, there's. I don't know what it is about us humans, but we do like to think of ourselves in these types of competitions.

[Kate Linebaugh]

Welcome to the Journal, our show about money, business and power. I'm Kate limebaugh. It's Tuesday, March 18th. Coming up on the show, will Walmart lose its crown as the king of retail?

[Sarah Nassauer]

Foreign.

[Unknown]

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[Kate Linebaugh]

When you started 10 years ago covering Walmart, what were you told you'd be covering?

[Sarah Nassauer]

I remember that one of the editors who interviewed me to take that job described the job to me in terms basically as I would be covering the slow decline of the king of retail. And that is kind of what I thought might happen.

[Kate Linebaugh]

The slow decline of the king of retail of Walmart.

[Sarah Nassauer]

That's right. To me, it's really interesting to have watched Walmart kind of get to this point and that they've actually been able to pull it off. They've actually been able to figure out a way to deliver lots of the things that we kind of want in a daily, weekly way, really, really fast. And really the last two years is when they made sort of a big leap to get there.

[Kate Linebaugh]

How did Walmart become the king of retail?

[Sarah Nassauer]

Walmart became the king of retail through probably ways that we think about as like traditional retail, right? Building lots of stores, selling things at a lower price generally than lots of competitors, having a really broad selection. So it made it really convenient to just go to one store and buy groceries, plus, you know, socks and a broom or whatever.

[Kate Linebaugh]

It all began in 1962 in Rogers, Arkansas with Walmart founder Sam Walton. His mission was to have the lowest prices anytime, anywhere.

[Sarah Nassauer]

Walmart's super inflation buster sale blast through the inflation barrier with big discount savings on hundreds of everyday items.

[Kate Linebaugh]

By 1990, Walmart was the largest retailer in the U.S. it had boxed out smaller stores and redefined how Americans shopped. But then the Internet happened and Walmart got a new upstart competitor which would change American shopping habits. Amazon founder Jeff Bezos envisioned a place where customers could, quote, come to find and discover anything and everything they might want to buy online. Through the 2000s, Amazon built out a network of fulfillment centers, offered two day shipping with Amazon prime, and expanded its offerings by allowing third party sellers on its platform. The growing Amazon was a threat to Walmart. And in 2014, when Walmart named a new CEO, Doug McMillan, it was one of the many things on his plate. What was his mission?

[Sarah Nassauer]

His mission was, you know, there were multiple things, but one big challenge was stores were in bad shape, sales were not great, and the store experience was not that great. Employees were grumbly, people didn't like their produce, they didn't think the prices were really that low anymore. And Amazon was coming, right? And that wasn't even a thing that they had a true defense plan for yet.

[Kate Linebaugh]

So McMillan started looking for ways to grow Walmart's online operation. And one part of the company caught his eye. An experiment happening in Colorado.

[Sarah Nassauer]

There was this tiny test at the time in Denver of a online pickup and delivery grocery service. The idea was you ordered online and then you got your groceries delivered or you picked them up in the store parking lot. Walmart really leaned into the pickup side of that. This idea that you buy online and you pick up in a store parking lot. That was in part because that's a much more profitable way to sell online than delivery. You're driving to the store, you're doing part of the labor for them.

[Kate Linebaugh]

This experiment worked. Within a few years, Walmart started offering online grocery pickup in a thousand stores across the country.

[Sarah Nassauer]

But they also knew and a lot, there's a lot of data that shows at the end of the day, shoppers want the most convenient thing and the most convenient thing is bring it to my house. We're selling these groceries at the same price online as you get in our stores. That's appealing to people. We have something there. Let's build on that.

[Kate Linebaugh]

So Walmart wanted to build out same day grocery delivery, but it wasn't easy.

[Sarah Nassauer]

Setting up a delivery network was really hard for Walmart because it's so expensive and, you know, incredibly complex. There was experiments to see if their own store workers would be the delivery drivers. That created a lot of complexity as well. There were experiments and a lot of attempts to use third party services like the Doordash, the Ubers of the world.

[Kate Linebaugh]

But these partnerships with delivery apps proved to be expensive and complicated. They led to abandoned orders, crowded aisles and a chaotic patchwork of drivers. In those years, Walmart also bought an E commerce startup called Jet.com for 3.3 billion. But it didn't work out as planned and Walmart had to shut the site down in 2020. For Walmart, the war between the Goliaths was getting expensive.

[Sarah Nassauer]

Billions and billions of dollars. And I think probably like on a deeper level, Amazon is such a clear threat. It was just internally over years getting through this like barrier of this is going to be expensive, this is going to be hard. You know, maybe we should have people do pickup, not delivery, right? All these internal debates, all of those challenges, at some level they sort of realize the board and executives, if we don't do these things, you know, we're going to lose big here.

[Kate Linebaugh]

Coming up, how same day grocery delivery is giving Walmart a fighting chance. This episode is brought to you by CBOE Global Markets. CBOE is a global exchange operator committed to building trusted markets worldwide. CBOE delivers cutting edge trading, clearing and investment solutions and products in multiple asset classes, including equities, derivatives and fx. Learn more about the exchange for the world [e-mail] over the years, Walmart has identified one area where it could outfox Amazon. Grocery Delivery. More than 50% of Walmart's U.S. sales come from groceries and its hope was that customers would come for onions and spaghetti and tack on other items with higher margins, like home goods, toys or clothes. Why does Walmart see fast grocery delivery as their edge?

[Sarah Nassauer]

That's an interesting question, because I feel like it's so illogical for Walmart to see fast grocery delivery as their edge. You know, you associate that with, with Amazon, right? I think Walmart sees low prices, having stores all over America, very close to most people that live in the country, and their giant grocery business as their edge.

[Kate Linebaugh]

To achieve this dream of same day grocery delivery, in 2018, Walmart launched an app with its own network of freelance drivers.

[Sarah Nassauer]

They called it Spark, which is named after the yellow star logo of Walmart. And you know, the idea was that just like with Uber or DoorDash, these wouldn't be Walmart employees. These are folks just that have the Spark app. They can decide whether to take a job and they pull up in the parking lot and a Walmart employee loads up their car or in some cases they go into the store and like shop the order and drive it to a customer's house for a charge. You know, Walmart pays them and then there's often a tip.

[Kate Linebaugh]

Spark was working and more and more of Walmart's orders were delivered via the app. But the app had limitations, namely in how it mapped out delivery areas for drivers. Spark started out using zip codes, but Walmart wanted it to be more precise.

[Sarah Nassauer]

They worked on the mapping technology that they used to determine which areas they can route deliveries to. And that technology became more complex and they were able to integrate census data and will food spoil and will the driver want to drive that far? Sort of more factors and use instead of zip codes, kind of a pixelated map that allowed them to just sort of get more granular and deliver to more places.

[Kate Linebaugh]

Spark is now responsible for over 80% of Walmart's deliveries and its stores, once considered the company's Achilles heel, have now become an asset. Sarah, who 10 years ago thought she was on the inevitable decline of Walmart beat, recently listened to the company's earnings call. She was surprised to hear that today Walmart is able to do same day delivery to 93% of American households. Why is Amazon struggling to compete in fast grocery delivery?

[Sarah Nassauer]

Because food is tough. You know, fresh food is just tough to deal with. It's very low margin and they don't have grocery stores that have the same level of coverage. So they have to build a fresh network, which is what they are doing rapidly. Right now that is delivery based. And they have had so many different models of trying to figure out how to both sell food that people want to eat and are willing to pay the price for and then get it to people fast because they're a delivery company that it's just, it's been trickier for them. They don't have that infrastructure. That is not where they come from. Whereas that is where Walmart and like a traditional grocer, that's what they do.

[Kate Linebaugh]

But Amazon does have a national grocery retailer. It has Whole Foods.

[Sarah Nassauer]

Yeah, I mean Whole Foods is more expensive overall. And also there's only a few hundred Whole Foods stores in the country and they tend to be clustered around urban areas. There's 4,600 Walmart supercenters and they're, they're everywhere.

[Kate Linebaugh]

Unlike Walmart, Whole Foods has a more limited grocery selection as a natural and organic supermarket. It doesn't sell brands like Cheerios or Doritos.

[Sarah Nassauer]

That presents the challenge because a lot of people, when they go grocery shopping, they might want to buy organic milk, but they also might want to buy Coke and they don't want to go to places to do that. Right. And right now you can do that at Walmart, but you can't do it at Whole Foods. So one thing that Amazon is experimenting with is this idea of an Amazon. They call it Amazon Grocery. It's like a little store that's right next to the Whole Foods. And the idea is then you sort of have one location, you're going to get all your grocery needs. Method.

[Kate Linebaugh]

After a decade long push, Walmart has a 9% share of U.S. e commerce sales. Amazon has 41%. And Walmart's online business as a standalone operation isn't profitable. How do they justify it?

[Sarah Nassauer]

It's increasing sales and they're grabbing market share and they have to because Amazon is doing the same thing.

[Kate Linebaugh]

They might lose their king of retail crown.

[Sarah Nassauer]

Yeah, they might still lose their king of retail crown in the annual revenue sense, but they might also see market share slip and sort of be chipped away at in a way that I think a lot of people thought would happen 10 years ago.

[Kate Linebaugh]

And in this war between our two Goliaths, who's caught in the middle in.

[Sarah Nassauer]

Competing against each other, they've become so incredibly powerful that there are lots of other losers. Right? And when Amazon and Walmart grow their revenue by X percent, it's so many more billions of dollars than when a smaller company does it that they're still taking market share from others.

[Kate Linebaugh]

So if you were to place a bet on who's gonna win in the clash of the titans.

[Sarah Nassauer]

You know, I feel like Walmart is so formidable, as everyone who has sold to them or competed with them knows. I cannot imagine a future where they're not a big player and a huge factor in what retail looks like in America. As someone who has followed the company for a very long time, fundamentally, I think one of the biggest issues is just the internal tendency to move slowly because it's such a big place. But obviously Amazon is a company that is built around technology and E commerce and AI and all these things that seem like they're going to be important in our future. And Walmart has a totally different history and like cultural, corporate muscle, foreign.

[Kate Linebaugh]

We're interested in hearing from you. Do you have any questions about what's happening with the Trump administration? Email us and let us know. Please send us a voice note to the journal sj.com that's the journal sj.com that'S All For Today. Tuesday, March 18th the Journal is a co production of Spotify and the Wall Street Journal. If you like our show, follow us on Spotify or wherever you get your podcasts. We're out every Weekday afternoon. Thanks for listening. See you tomorrow.