Blogs have been chattering recently about whether Amazon (AMZN) or Walmart (WMT) will dominate Internet retailing in the future. But what some analysts forget is this is not an apples-to-apples comparison. A close look at the two companies' audiences reveals some interesting possible ways the competition between these two may play out.
Growth in e-commerce -- from exactly squat 15 years ago to a forecasted 10 percent this year -- has made it an increasingly important retail arena to watch. Recently, influential technology blog GigaOM noted that Amazon may be smaller than Walmart now, but the Seattle company is growing at a faster rate than Walmart did as a young company. A Cowen & Co. report indicates Amazon's sky-high valuation is supported by the proposition that the company could catch up to Walmart in time.
In recent months, Walmart has loudly proclaimed its interest in unseating Amazon online, bragging in shareholder meetings about its faster online-sales growth rate and ability to do what Amazon can't: let customers order online and pick up in stores. During the holidays, the retail behemoth engaged in aggressive online price-cutting to beat Amazon in key categories.
But do growing online sales for Walmart necessarily mean less sales for Amazon? A comparison of their shopper demographics by the market-research firm Quantcast seems to indicate that either company will have a tough time eclipsing the other. If we make the assumption that Walmart.com has a similar audience to Walmart stores, their audiences are distinctly different.
Amazon's shoppers are older, wealthier, better-educated and more likely to be childless. More than one-quarter are over 50, 57 percent earn over $60,000 a year, and 64 percent are childless. They're split evenly between men and women.
By contrast, Walmart shoppers are predominantly young women--63 percent. Nearly half have kids, and 51 percent earn more than $60,000. Shoppers under age 34 are close to half the customer base. Fewer shoppers went to graduate school or earn over $100,000 a year compared with Amazon's customers.
In other words, the two companies are preaching to different virtual choirs. As they grow, they may steal some of each others' customers. Or their efforts may bring them new customers from niche sites that match their demographics, allowing both companies to grow without damaging each other greatly.
Another scenario -- either retailer might strengthen their position by focusing more intently on their key audiences. Walmart might push more strongly into products that appeal to women, or Amazon could offer more high-end goods Walmart might be unlikely to stock. This differentiation would likely cause the two competitors' offerings to diverge over time, putting them in less direct competition with each other.
The wild card here is how strongly shopping may evolve toward ecommerce-only. For shoppers who want their goodies to simply turn up on their doorsteps, Amazon has the upper hand. If customers grow to prefer online-ordering from a company where they can pick up or return an item at a physical store, Amazon will come up the loser.