Walmart is a retailing powerhouse. The Bentonville, Arkansas-based company is the world‘s largest retailer by a long shot, with over $570 billion in annual revenue. To put that in perspective, that‘s more than 2.5 times the revenue of Amazon, the second largest retailer globally. In the U.S., Walmart captures one out of every four dollars spent on groceries. Nearly 90% of Americans live within 10 miles of a Walmart store.
Walmart‘s sheer size and scale make it a formidable competitor that strikes fear in the hearts of other retailers. However, in recent years, rivals have begun chipping away at the retail giant‘s dominance. Let‘s take an in-depth look at who Walmart‘s biggest competitors are and how they stack up:
1. Amazon
While Walmart still dwarfs Amazon in terms of overall revenue, the e-commerce giant is quickly closing the gap. Amazon posted $386 billion in net sales in 2020, a 38% increase over the prior year. More importantly, Amazon now captures over 40% of all online retail spending in the U.S.
Walmart has invested heavily in e-commerce but still only has about a 7% share of the U.S. online retail market. The company‘s e-commerce sales grew 79% in fiscal 2021, boosted by the pandemic-fueled surge in online shopping. But it will be tough for Walmart to catch up to Amazon‘s big lead here.
Amazon‘s main advantage is the popularity and stickiness of its Prime membership program, which boasts over 150 million paid subscribers globally. Prime members spend significantly more on Amazon than non-members. The membership includes perks like free shipping, video and music streaming, and more that keep customers loyal. About 65% of Walmart.com shoppers also have a Prime membership, according to research firm Civic Science.
Beyond e-commerce, Amazon is also emerging as a bigger threat to Walmart in the brick-and-mortar space. The company now has over 500 Whole Foods stores, along with Amazon Fresh grocery stores, Amazon Go convenience stores, and Amazon 4-Star stores that sell top-rated products from its website. As Amazon expands its physical footprint, Walmart will face more direct competition.
2. Kroger
Kroger is the largest standalone grocery chain in the U.S. with over $130 billion in sales across its family of stores that include Kroger, Ralphs, Fry‘s, and Harris Teeter. About 56% of Kroger‘s sales come from its private label brands. Like Walmart, Kroger aims to be a one-stop shop, with groceries accounting for 75% of sales and the rest coming from general merchandise, pharmacy, and fuel.
While Kroger can‘t match Walmart‘s prices across the board, it does promote steep discounts and personalized digital coupons through its rewards program to drive customer loyalty. Kroger has also been quickly expanding its online grocery services. Digital sales more than doubled in fiscal 2020 and now account for over 10% of total sales.
Kroger has made some smart moves to gain an edge on Walmart. It has invested in automated fulfillment centers with UK online grocer Ocado to offer a better online experience. It has also launched ghost kitchens to provide on-demand meal delivery. Expect Kroger to continue to innovate as it defends its turf in the nearly $1 trillion U.S. grocery market.
3. Costco
Costco is a different beast than Walmart in that it operates as a membership-only warehouse club. But with 105 million cardholders globally, including over 60 million paid household members in the U.S., it‘s a major force in retail. Costco is known for its bulk sizes, low prices, and high quality, especially in categories like food and fuel.
In fiscal 2021, Costco‘s comparable sales excluding gas and currency impacts rose over 13%, outpacing Walmart‘s 8.6% growth. Costco members are extremely loyal, with renewal rates around 90% in the U.S. and Canada. The membership fee is pure profit for Costco and allows it to offer rock-bottom prices. Costco‘s membership model is enviable, generating recurring revenue and locking in customer loyalty in a way Walmart cannot.
Costco has also built a sizable online business, though it‘s still small compared to the company‘s overall sales. E-commerce comparable sales jumped 50% in fiscal 2021, accounting for 7% of total revenue. During the pandemic, Costco added curbside pickup for groceries, a key convenience Walmart has offered for years to make buying easier for busy families.
4. Target
In terms of store footprint, merchandise mix, and average basket size, Target is Walmart‘s most direct competitor. Target operates about 1,900 stores in the U.S. compared to Walmart‘s 4,700 namesake locations. Both retailers sell a wide array of products including groceries, apparel, home goods, electronics, toys and more.
But Target has focused on a slightly more affluent, suburban shopper than Walmart, with a "cheap chic" image. Target‘s stores are also generally smaller and easier to navigate than Walmart‘s supercenters. These factors have helped Target consistently generate stronger comparable sales growth and profitability than Walmart in recent years.
Target‘s omnichannel strategy has been firing on all cylinders. The retailer has remodeled its stores, improved its private label brands, and used its locations as hubs to efficiently fulfill online orders. In fiscal 2020, Target‘s comparable sales surged 19.3%, the company‘s strongest performance in over 15 years. Digital comparable sales skyrocketed 145%.
One major advantage Target has over Walmart is its Redcard rewards credit and debit cards. Redcard holders receive 5% off all purchases, free shipping, and an extended return window. About 1 in 5 Target shoppers are Redcard users and they tend to visit more often and spend more than regular customers. If Target can continue to gain wallet share among this loyal base, it will be a thorn in Walmart‘s side.
5. Alibaba
While Alibaba doesn‘t compete with Walmart in the U.S., it‘s a major threat internationally, especially in the massive Chinese market. Alibaba is the largest e-commerce company in the world with over 1 billion active customers. Its Taobao and Tmall shopping sites have over 50% market share in China.
To better compete with Alibaba, Walmart initially invested $16 billion to acquire a majority stake in Chinese online retailer JD.com. But the partnership didn‘t pan out as hoped. Walmart sold most of its position in 2021 and instead said it would focus on growing its own business in China.
Walmart currently has about 440 stores in China and has struggled to gain traction against regional competitors. Revenue in China accounts for less than 2% of Walmart‘s total. The Chinese market is highly fragmented and local rivals like Alibaba and JD.com have the home field advantage when it comes to understanding and serving Chinese consumers‘ wants and needs.
As Alibaba expands its global footprint through its AliExpress site and investments in Southeast Asian platform Lazada, it will continue to butt heads with Walmart. The Chinese tech titan has deep pockets and unparalleled scale that make it perhaps an even mightier foe for Walmart than Amazon in the long run.
The Bottom Line
There‘s no denying Walmart is still the king of retail, but its grip on the crown is slipping. Competitors like Amazon, Kroger, Costco, Target, and Alibaba are chipping away at Walmart‘s customer base and market share through a combination of e-commerce prowess, compelling membership models, appealing store experiences, and new digital services.
Walmart is aggressively responding to these competitive threats. The company has invested billions in raising wages and enhancing employee benefits to improve customer service. It has revamped its website and mobile app and formed innovative partnerships with companies like Shopify and ThredUp. Walmart is also making big bets on technologies like robotics, AI, and autonomous delivery to boost efficiency.
But the competitive pressures Walmart faces aren‘t going away anytime soon. If anything, they will likely intensify as the lines between online and offline retail continue to blur and customer expectations around convenience, speed, and personalization keep rising. For Walmart to stay on top, it will need to keep its foot on the accelerator and continue to evolve. One thing is certain: the retail rumble between Walmart and its rivals will be fascinating to watch in the years ahead.
