When it comes to selling on online marketplaces, Amazon and Walmart are the biggest eCommerce platforms. While the two giants offer a wide range of audiences and advanced eCommerce infrastructures, sellers wonder where they should sell their products for the highest ROI.
In this blog, we want to give sellers a greater understanding of the differences between the both. We will talk about their market share, ease of selling, popular categories, and other key differences that will help you leverage both for your eCommerce strategy for 2023.
Ecommerce growth in 2023
Since the pandemic, there has been a paradigm shift in online shopping trends. While the first two years saw more than 20% growth each year, it slowed down in 2022. But in 2023, it is forecasted to have another 20% jump in revenue. So if you are an online seller, there is an opportunity to increase your sales by selling on both marketplaces.
For the longest time, Amazon has been leading the eCommerce space. But in the past few years, Walmart has been growing its efforts to give customers a similar experience, through the Walmart Marketplace. Many Amazon sellers see Walmart as an opportunity to gain some new market share and establish a foothold in their categories while the competition is low on Walmart Marketplace.
As Walmart enters the marketplace race and 2023 forecasts significant growth in eCommerce revenue, sellers and brands will have a new avenue to take some share of the pie.
Marketplace growth & market share
While Amazon’s US eCommerce sales ($51 billion) have been higher than Walmart’s ($21 billion) sales in 2022, the total revenue for Walmart ($150 billion) was more than Amazon’s ($120 billion).
Walmart’s presence in the physical retail space is a key reason they maintain a larger market share. This brand equity looks promising for Walmart Marketplace Sellers as Walmart looks to leverage its name to grow its eCommerce presence.
As Walmart looks for omnipresence, they have a lot of work to cut into Amazon’s 37.8% eCommerce market share, versus Walmart’s 6.3%. While the average number of online visitors on Amazon is five times more than Walmart, Walmart’s eCommerce sales grew 11.8% from the previous year, while Amazon had a negative growth of 4.61%.
Despite lower online traffic, Walmart’s online sales have grown faster in 2022 than Amazon, which shows an excellent opportunity for sellers to get into the Marketplace while it’s relatively small and then grow their business as Walmart Marketplace grows. This market share opportunity, less competition, and Walmart’s focus on adjusting marketplace infrastructure make it an attractive option.
Suitable For More Established Brands
As Walmart Marketplace is growing fast and catching up to Amazon, the competition is fierce. However, competition between Walmart and Amazon are two contrasting activities.
While Amazon has 6.3 million third-party sellers, Walmart has only 150K.
Walmart may also not catch up to Amazon anytime soon because Walmart does more due diligence on their sellers to provide better quality products. For instance, it may take 24 hours to get approved as an Amazon seller, and it could take up to 2-4 weeks to get approved on Walmart Marketplace.
Due to a higher barrier to entry to become a Walmart seller, an established online business with a decent sales record has a big opportunity to gain a huge market share on Walmart Marketplace. Whereas, for a new seller, there might be some hurdles to advertise on Walmart due to a lack of experience.
In contrast, new sellers can easily sign-up on Amazon, however, it would require a thorough eCommerce merchandising strategy to break into the marketplace due to the high competition.
Walmart is a lucrative opportunity for established brands in 2023, as the number of sellers are significantly less than Amazon, and knockoff brands will be far less prevalent due to the documentation requirements.
Other than the difficulty of being approved as a seller, Walmart requires more documentation than Amazon. A Walmart Seller account undergoes a ‘trust and safety’ review before approval. Some of the requirements looked at in the process include:
- Business license number
- Tax Identification
- Supporting documents that verify your business name and address
- History of eCommerce success
- Products that have GTIN/UPC GS1 Company Prefix Numbers
- Catalog that complies with Walmart Prohibited Products Policy
Meanwhile, Amazon offers a much easier onboarding process once you purchase a seller plan. It only requires standard information such as an ID number, tax information, contact information, and a bank account number.
While documentation may become a barrier to entry for some online sellers, it is an opportunity for those who have established businesses that can fulfill the requirements easily.
These requirements may also add to the positive perception of Walmart. Being more particular about who sells on Walmart means that customers will be getting products from reliable brands. This, in addition to their brand equity as a physical retailer, means that brands on Walmart Marketplace will also look more trustworthy by association. This can be valuable for all brands but especially those in pharmaceuticals, toys, and other categories that require a high level of trust.
If you want to sell on Walmart and Amazon, you must at least pay their commission fees. Amazon’s Professional Seller Account costs $39.99 monthly, while sellers also incur a referral fee as high as 20% for every sale. Plus, additional shipping fees will apply if you choose the Fulfillment by Amazon (FBA) service. If you use Amazon’s warehouse, there are also storage fees, which include return processing, order removals, and FBA label services. Amazon also has a basic account for beginners but has limitations to selling on various categories, access to fulfillment services, and other selling features.
Whereas, Walmart has only one type of seller account which is free and doesn’t require recurring monthly fees. Instead, they charge referral fees for items sold and shipping costs for Walmart’s Fulfillment Service (WFS). Referral fees range from 6%-15% depending on the item sold.
Walmart’s smaller referral fees and no recurring monthly fees mean that Sellers at Walmart have higher profit margins. This wiggle room can be helpful for brands with low-margin items as they can advertise and promote more freely. Where brands may have only been able to advertise with an advertising cost of sales (ACoS) of 8% to break even on amazon, they may be able to set their benchmark at 10-20%. How much further could you grow if you had this much more room to breathe?
Selling on Amazon vs Walmart requires a performance standard and failing to keep up may lead to account suspension. For all orders, including self-fulfilled orders, Amazon requires sellers to:
- Have an Order Defect Rate (ODR) of less than 1% over 60 days.
- Maintain cancellation rate under 2.5% over seven days
- Keep a late shipment rate of 4% and below over a ten and 30-day period for self-fulfilled shipping only
Whereas, Walmart sets three core requirements for sellers. These include:
- Keeping a 90 ODR under 2% over 90 days
- Maintaining an on-time shipping rate of 99% or more
- Keeping a valid tracking rate of 99% and above after confirming a shipment
While both have high-performance standards for sellers, not complying with these standards not only dents your partnership with the marketplace but also gives a poor customer experience. Therefore, regardless of the marketplace, sell products in great condition and deliver on time.
Shopping behavior, trends, & categories
Selling on Walmart and Amazon gives you access to millions of consumers. However, both differ in demographics and spending habits.
- Biggest Categories: Walmart’s biggest category for consumers is groceries, over-the-counter medications, and cleaning supplies. Whereas, Amazon’s biggest categories include home & kitchen, beauty & personal care, and toys & games. Consumers prefer Amazon over Walmart for electronics, books, and clothing.
- Shopping behavior: 75% of consumers purchase from Amazon in the US, whereas 43% shop at Walmart. Moreover, more than half of all potential buyers start their product search on Amazon rather than Walmart.
- Amazon Prime vs Walmart Plus: Amazon customers find more value in their membership than Walmart. Amazon has 57% prime memberships, while Walmart plus 31% of Walmart customers have Walmart Plus.
- Lower prices: Among home goods, technology and entertainment, kitchen/appliances, and a few other categories, LendEDU found Walmart product prices were 1.79% cheaper than Amazon for 50 identical products.
- Average household income: Walmart and Amazon customers are quite similar except that the average household income of Amazon customers (85K) is more than Walmart customers (76K). Therefore, Walmart tends to attract slightly lower-income shoppers as they advertise.
Amazon’s initial strengths in the market as far as categories and shopping behaviors may be a huge factor for sellers if they had to pick one marketplace. However, each has its nuances, and running a store on both may help you make up for their weaknesses. If you can’t imagine what type of resources and process you might need to do this talk to our team about automating some of these components.
Fulfillment services: FBA vs WFS
While anyone can join Amazon’s FBA, Walmart Fulfillment Service (WFS) has specific requirements which limit the number of sellers. Walmart prefers its experienced sellers for its fulfillment services. WFS’ late introduction into the market gives FBA an advantage. FBA’s huge infrastructure and international fulfillment capability mean lower fulfillment costs to the seller. The fulfillment cost of Amazon and Walmart for sellers starts from $2.5 and $3.45, respectively.
Walmart has 31 dedicated eCommerce fulfillment centers and 4,700 stores located within 10 miles of 90% of the U.S. population to fulfill online orders. Whereas, Amazon has more than 110 fulfillment service centers in the US and 185 centers globally.
Both offer similar free next-day and two-day delivery for their respective members. For non-members, Walmart offers free delivery for orders above $35, while for Amazon, it varies depending on the products and sellers.
While Amazon has an edge in fulfillment services with more delivery centers and lower costs to sellers, Walmart is picking up its distribution networks in the US as it leverages its established stores and logistics network. If you are a US seller, fulfillment services are more costly but due to less competition, it can be hedged through higher product prices.
Low prices matter to both retail giants as they are customer-centric rather than brand-centric. Being able to offer the best prices is a part of the company’s identity and longstanding strategy.
Amazon resolves the lowest prices philosophy through a higher number of sellers, competing for the Buy Box position. Amazon’s flywheel model suggests low prices drive more shoppers, which brings more sellers, increasing competition, hence lowering prices even further. Moreover, FBA and Seller Fulfilled Prime accounts also have been automatically set to win the buy box over other Amazon sellers.
Whereas Walmart follows Price Parity and Price Leadership Rules that say if the same product with the same attributes is priced significantly lower than outside Walmart, then it has been ‘unfairly priced.’ Walmart may unpublish products if sellers do not keep up with competitive prices.
Therefore, the pricing strategy on both marketplaces is competitive pricing, but for Walmart, it has to be the lowest price. This may lead to slim margins but that is the price you need to pay to partner with the biggest online retailers.
Learn more about pricing strategies in a competitive market here.
Since 2020, with an improved eCommerce infrastructure, Walmart’s ad platform has been growing. The average Cost-Per-Click is expected to be low as there are fewer sellers on the Walmart marketplace.
Although, there are various factors that would determine your Walmart and Amazon PPC cost, such as ad type, category competitiveness, and bidding strategies; we know more sellers are spending on advertising. Amazon’s ad revenue is expected to double by 2026, despite increased competition for the sellers.
High competition reflects high CPCs and increased ACoS, but there are several ways to reduce ACoS including advertising automation.
To conclude, advertisers with smaller budgets are better off on Walmart than Amazon due to fewer sellers, less competition, and lower CPCs. However, a strict approval process can benefit established brands even more.
Where to focus in 2023?
Ecommerce revenues are forecasted to rise in 2023, and being present in both camps can help you grow your business. You may see larger market share growth on Walmart as fewer of your competitors have the resources or confidence to enter new territory. Yet, this might make it an opportunity for you as less competition, low fees, and being associated with Walmart’s formidable brand equity could lead to huge market share growth.
On the other hand, Amazon still has five times more visitors than Walmart, the majority of the market share, and more established infrastructure to ease the pain of eCommerce selling. While selling on Amazon is necessary to maintain revenues, Walmart may be an opportunity to grow profits or a place to grow additional market share with fewer obstacles.
To grow profitably on both marketplaces the key is a strong advertising and pricing process. If you want to learn more about leveraging both marketplaces through AI and automation, you may book a free call with us. Our experts study data and trends for a living. They can help you tactically or guide you on an eCommerce merchandising strategy that could help you maximize your ROI in 2023.