When Will Amazon Catch Walmart as the World’s Largest Retailer?

It’s becoming increasingly clear that e-commerce will be ubiquitous in a post-pandemic world. Boxes touting the Amazon smiley face logo pointing from ‘A’ to ‘Z’ will only increase in prevalence. But if you thought Amazon was already the top name in retail, think again.

That’s still a title belonging to Walmart, at least for now. But that could change in just a few years.

Amazon closing in on the top title

In 2020, Amazon’s total revenue was $386 billion, a 38% increase over 2019, as digital commerce became more important than ever during the COVID-19 lockdown. Excluding the $45.4 billion in revenue the company’s AWS cloud computing segment hauled in, revenue increased 39% to $341 billion. Incredibly impressive for a company of such epic proportions.

Walmart recorded $559 billion in sales in 2020 (its fiscal year actually ended Jan. 31, 2021, versus Amazon’s at the end of calendar year 2020, so it’s close enough). It still isn’t a perfect apples-to-apples comparison, but when excluding Amazon AWS from the equation, the e-commerce pioneer is still a shocking $218 billion in annual revenue from overtaking behemoth Walmart. However, while catching Walmart sounds like a long-term goal, it may be closer than the top-line numbers indicate.

Walmart’s total revenue grew 6.7% last year — a sizable increase for the big-box store as it too benefited from the effects of the pandemic. But let’s just assume Walmart and Amazon continue to grow sales at half the rate they did in 2020 for the next few years (growth for both companies will likely moderate as effects of COVID-19 slow). Assuming 3.3% growth for Walmart and 20% for Amazon, Amazon is right around the corner from overtaking Walmart as the world’s largest retailer.

Data source: Based on full-year 2020 revenue provided by Walmart and Amazon.

A lot can change between now and then, but if the growth trajectories of Walmart and Amazon slow down in the next few years, Amazon’s faster e-commerce expansion will place it atop the global retail and e-commerce industry in 2024. In some areas, it’s already winning. Analysts at Wells Fargo, for example, estimate Amazon has already surpassed Walmart as the largest apparel retailer in the U.S. Expect more landmark announcements like that in the years ahead for Amazon.

The implications for Amazon are really meaningful

To be clear, 2024 may or may not be the year Amazon wins the title of heavyweight champion of the retail world. But what’s really incredible is that when Walmart passed the $340 billion revenue landmark (back in 2006-07), it grew at an 11% year-over-year rate. Amazon is clobbering that growth metric at a similar size.

It speaks to the inherent “optionality” of e-commerce. Product sales out of a store have limited ability to scale. By contrast, Amazon has turned itself into a full-blown platform facilitating advertising and order fulfillment and online services like video and music streaming. Walmart has taken a crack at these things, too, but with limited success. And though it’s a younger company spending heavily to promote its continued expansion, Amazon’s operation is more profitable.

It generated $25.9 billion in free cash flow last year compared to $25.8 billion for Walmart. Granted, it’s likely over half of Amazon’s free cash flow generated came from AWS, but let’s not take too much away from the company. E-commerce inherently has additional expenses, like delivery to customers’ homes, that physical store retail doesn’t have to account for. Amazon has cracked the code and is a highly profitable company these days.

That’s a situation that will only improve over time as Amazon continues to advance on Walmart. Though it’s already one of the most valuable organizations on the planet (market cap of nearly $1.6 trillion as of this writing), Amazon’s high-growth story is far from over.