Why Amazon, Walmart, and Target Can All Win as E-Commerce Soars - Barron's

Walmart and Target are seeing big jumps in their online sales, and isn’t at Amazon’s... — Walmart and Target are seeing big jumps in their online sales, and isn’t at Amazon’s expense.
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The coronavirus pandemic forced a huge amount of retail purchases to move online, and that has been depicted as a battle between Walmart and Amazon.com. But in fact, they might both be winning.

Jefferies’ Brent Thill recently hosted a discussion with a pair of industry experts, and their conclusion is that as e-commerce surges, the three major players—Amazon.com (ticker: AMZN), Walmart (WMT) and Target (TGT)—are all making strides.

Thill’s experts estimate that total e-commerce growth has now reached 14.5% of overall retail sales, up from 11% last year. “The penetration shift represents the biggest one-year jump on record, and is being driven by a step-change in online consumption of grocery/essentials and utilization of click-and-collect offerings,” Thill said in a report on Monday.

Much of that is related to lockdowns that closed stores, and the experts think e-commerce growth will decelerate to 7.8% next year (presumably when a vaccine or effective treatments help to mitigate the risk) before returning to midteens growth in 2022.

Thill’s sources think some consumer behavior will permanently change, including many people who will continue to buy essentials such as food online. “Food and beverage, still the least-penetrated category online, is expected to grow online sales 58.5% in 2020. Much of the share gain is expected to persist even after a cure/vaccine is found.” Yet some click-and-collect business will return to in-store shopping.

Amazon, Target and Walmart are expected to be long-term beneficiaries. Amazon is “the best e-commerce marketplace to build a brand,” Thill said. It is driving 43% of total e-commerce growth this year, and recent sales have remained strong. Walmart and Target are also seeing big jumps in their online sales, and that “growth is not coming at Amazon’s expense.” Nor does it seem likely that Walmart+, the company’s new Prime-like subscription service, will draw many customers away from Amazon.

Barron’s has written previously about how the pandemic has been a boon for the biggest players across the board as online sales soar, with smaller companies taking the biggest hit. We have also talked about the power of habits formed during the crisis. So while these giants may be slugging it out to a degree, they can all succeed at the expense of many smaller rivals.

Write to Teresa Rivas at teresa.rivas@barrons.com

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