Comment by adventured | Hacker News Reader

Comment by adventured | Hacker News Reader

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Amazon has to roughly triple in size in retail to pass Walmart, with zero growth on Walmart's side.

In retail sales, I would guess Amazon could catch up to Walmart in 10 to 12 years if everything goes well for Amazon, assuming Walmart holds steady (which impressively they have so far). Walmart did finally grow for the first time in years in 2017, jumping from $485b in sales to $500b (they were stuck in the $482b-$485b range for three fiscal years).

Walmart has perhaps ~$450b in strictly retail sales globally. Amazon should be at something like $160b to $180b this year (in retail, including Whole Foods). Walmart's US retail sales were 270% larger than Amazon US for 2017. One of the not often discussed data points, is that Amazon's traditional online retail sales are no longer growing very quickly. That big retail growth slowdown has been hidden by the success of AWS and more recently advertising. I'd bet on their online sales growth being a slugfest going forward, with their online growth rate dropping to near single digits within a few years.

There's actually a very plausible scenario where Amazon never passes Walmart in retail. That premise is that it's between very difficult and impossible for Amazon's online sales to match what Walmart's epic physical store position makes possible in terms of retail sales volume. It's not a popular media premise though, the Amazon-crushes-all story is what sells. Perhaps Amazon will divert a lot more resources toward expanding physically going forward to counter that (at least they seem bent on that, maybe they've figured out that online retail sales will never match offline sales in the US).

Amazon so far has been mostly eating other retailers, and perhaps robbing Walmart of some growth it would otherwise have picked up. As Amazon pursues its next $100b in retail sales growth, is it possible for that to not detract from Walmart's $500b in sales? It's difficult to picture Amazon getting as big as Walmart in retail, without killing Walmart. If that does happen - they both survive intact - the rest of retail will be a complete wasteland of destruction (there's not enough growth in the US economy to accomodate two mainstream retailers the size of Walmart anytime soon, without a lot of other retail getting killed in the process).

Fascinating. Simply fascinating.

I have so many questions for you. Have you been studying Walmart long or is it just a passing fancy? How does a company just squeeze out ~$15 billion dollars from a revenue machine in motion (was there some long term plan that came to fruition? Did the pull some Office Space kind of caper and "find" it in their books?)? I have had this picture in my head of Walmart being very similar to fungi (mushrooms specifically): all people see is the storefront, the spiteful and mean-spirited "people of Walmart" caricatures, and the evil business destroying monster (these would be the toadstools); hidden beneath the surface is a massive network of nodes, pathways, connections, and raw infrastructure constantly shifting mass and energy at every moment in every type of climate and condition. I read somewhere that they lose ~$4 million a month in theft and damage. I thought that was a lot... $500 billion... that was one of the stimulus packages that saved the banks...

Fascinating. Your comment was a delight and I am off to dig up more on the company that will hopefully carry humanity to the asteroid belt.

Walmart is so large, they're projecting to save $200 million per year on energy costs by switching to all-LED lighting and away from fluorescent lighting in their stores, parking lots, etc. That savings is almost equivalent to the full-year operating income for Salesforce.com in their last fiscal year ($235m).

The $15b gain in sales was in part due to ecommerce gains, while physical retail remained steady with modest same store sales gains. Thanks in part to the Jet.com acquisition, they grew by 44% online in 2017 (fourth quarter online growth dropped to 23%, with the Jet.com boost rolling past). They've been going around buying up independent retail brands, like ModCloth, Bare Necessities, Bonobos. They view that brand accumulation as building up a moat vs Amazon, I'd expect them to continue with that.

The most interesting thing about Amazon today, is that at least 3/4 of the value in their business is outside of traditional retail. Their relatively young ad business will be worth more than their retail business within a year or two (if it's not already). Sometimes I think Alibaba was their primary inspiration for going aggressively that direction, more so than Google or Facebook. With enough of a thriving ad business on top of retail, they can do things no other normal retailer can ever do when it comes to margins, they can safely take their margin in retail to zero (ie intentionally yield zero profit in retail, and build an ad business as big and profitable as Facebook's). Walmart can't compete with that tactic, it'll draw intense anti-trust scrutiny over time if they do it.

Competing with Amazon has helped push Walmart's annual profit down considerably over time, despite sales doing well: $15.9b (fiscal 2014 profit), $16.3b, $14.7b, $13.6b, $9.8b (fiscal 2018). If Amazon uses the nuclear option on margins with a thriving ad business (not to mention AWS) as a profit buffer, they might be able to push Walmart into losing money in retail in a price fight. I'll be curious to see if that's the direction Amazon goes competitively.

I spend four to five hours per day reading and have a very strong memory, so I hoover up a lot and remember most of the things I read. No particular focus on Walmart.

I had no idea Amazon advertising could be so profitable it could out-earn its retail business but looking into it it makes sense. Amazon search results by keyword has to be the most effective form of advertising I'm aware of. Google searches, social media ads, TV ads, etc., are mostly just throwing up noise. But when I search on Amazon, similar to how I used to search eBay, those promoted results are relevant to something I'm actively looking to buy. And since Amazon is my go-to retailer for nearly all non-basic necessities, it's probably the most relevant and targeted advertising I see by far.

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