Who Can Challenge Walmart And Amazon?

(JACQUES DEMARTHON/AFP/Getty Images)

Most analysts currently recognize the retail space as a two-horse race. Walmart has held the top spot on the Fortune 500 list for five straight years. Amazon is striving to become the first trillion-dollar company and has investors swooning over its bold moves into smart technology, entertainment and the grocery business. In a day and age where consumers expect a first-rate digital experience, anyone looking to join that race will have to be technically savvy and have a strong brand already. A merger between eBay and Costco could be just what the doctored ordered.

How This Benefits eBay

eBay is known more for its online auction platform even though it hasn't done much in the way of merchandising. By joining forces with Costco, it would not only get a supplier but add a brand that resonates with the millennials it's lost to Amazon and Jet.com. Additionally, like Walmart and Amazon, eBay would have a customer touchpoint. With the rise of AR, VR and even MR, having a physical presence allows eBay to better compete in this space, which is the future of retail. Having the revenue of Costco on its books and the momentum that the positive press of a merger likely would bring will allow the company to gain access to the capital needed to develop a best-in-class AR/VR experience.

How This Could Be Good For Costco

Young Americans are driving a resurgence in city centers. With the price of real estate at an all-time high, building a warehouse in a city center is often not feasible. To date, Costco has not seen the success it might have hoped for in launching its e-tail business. It's not an easy space to get into. In terms of pure play e-tailers, only Overstock and Amazon have ever become profitable doing it. By working with eBay, Costco would have a platform that is credible and that consumers are familiar with. This will allow the company to expand its business into the digital space and reach millennials who are willing to pay a premium to have a downtown apartment and prefer to shop online.

Why Might Walmart Worry?

To be clear, Walmart would not initially be threatened by a merger. However, it would be something the retail chain would want to keep an eye on.

Traditionally, Costco has been classified as a competitor to Sam’s Club, though the former's revenue and brand seem to put it in a higher weight class. Walmart is in a race to compete online, hence its acquisition of Jet.com. For a long time, eBay was the premier online marketplace. With the $8.97 billion in generated in revenue last year via its auction platform, it is still a major player today. Ostensibly, this number will grow with its own merchandising, much like a merger would allow it to do. Costco would also gain instant digital credibility from an established digital player. Considering Jet.com only did $1 billion in gross merchandise value before Walmart acquired it and was still considered a major player, it indicates where Costco might fall in the market should it merge with eBay. Even though its brick-and-mortar presence still lags well-behind Walmart, Costco would become much more competitive since it could have a sizable market share on both the digital and physical fronts.

(JACQUES DEMARTHON/AFP/Getty Images)

Most analysts currently recognize the retail space as a two-horse race. Walmart has held the top spot on the Fortune 500 list for five straight years. Amazon is striving to become the first trillion-dollar company and has investors swooning over its bold moves into smart technology, entertainment and the grocery business. In a day and age where consumers expect a first-rate digital experience, anyone looking to join that race will have to be technically savvy and have a strong brand already. A merger between eBay and Costco could be just what the doctored ordered.

How This Benefits eBay

eBay is known more for its online auction platform even though it hasn't done much in the way of merchandising. By joining forces with Costco, it would not only get a supplier but add a brand that resonates with the millennials it's lost to Amazon and Jet.com. Additionally, like Walmart and Amazon, eBay would have a customer touchpoint. With the rise of AR, VR and even MR, having a physical presence allows eBay to better compete in this space, which is the future of retail. Having the revenue of Costco on its books and the momentum that the positive press of a merger likely would bring will allow the company to gain access to the capital needed to develop a best-in-class AR/VR experience.

How This Could Be Good For Costco

Young Americans are driving a resurgence in city centers. With the price of real estate at an all-time high, building a warehouse in a city center is often not feasible. To date, Costco has not seen the success it might have hoped for in launching its e-tail business. It's not an easy space to get into. In terms of pure play e-tailers, only Overstock and Amazon have ever become profitable doing it. By working with eBay, Costco would have a platform that is credible and that consumers are familiar with. This will allow the company to expand its business into the digital space and reach millennials who are willing to pay a premium to have a downtown apartment and prefer to shop online.

Why Might Walmart Worry?

To be clear, Walmart would not initially be threatened by a merger. However, it would be something the retail chain would want to keep an eye on.

Traditionally, Costco has been classified as a competitor to Sam’s Club, though the former's revenue and brand seem to put it in a higher weight class. Walmart is in a race to compete online, hence its acquisition of Jet.com. For a long time, eBay was the premier online marketplace. With the $8.97 billion in generated in revenue last year via its auction platform, it is still a major player today. Ostensibly, this number will grow with its own merchandising, much like a merger would allow it to do. Costco would also gain instant digital credibility from an established digital player. Considering Jet.com only did $1 billion in gross merchandise value before Walmart acquired it and was still considered a major player, it indicates where Costco might fall in the market should it merge with eBay. Even though its brick-and-mortar presence still lags well-behind Walmart, Costco would become much more competitive since it could have a sizable market share on both the digital and physical fronts.

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