We all have to shop and and shopping is good for us and the economy particularly in a service based economy. This means many jobs are connected to the shopping experience and if enough people in the economy shop, all is good. Where they shop and how they shop are different stories.
In an article by Karen Weise and Michael Corkery of The New York Times News Service, Amazon is now the biggest retailer outside China. In the past 12 months ending in June, people around the Globe spent $610 billion at Amazon according to the financial research firm FactSet. Walmart was second at $566 billion. If China is included the top retailer is Alibaba Group.
Over the past century the top retailer in the world has changed and you or your family may have shopped at the locations. In the 1940’s the grocery retailer A&P had the government pursing antitrust measures, then after the war and the growth of the suburbs came a new retailer Sears.
Then came Walmart. The home of low prices is also the home of the best logistics company in the world. Sam Walton true innovation was building a vast logistics network that operated and operates with such precision and efficiency that it crushed many competitors. The model works very very well when people have to go into a store and buy things. Walmart’s automatic ordering system ensures the shares are not out of a product.
In the e-commerce world, Amazon is a winner and Amazon captures 41 cents of every dollar spent online in the US, Walmart takes in 7 cents according to eMarketer. Amazon’s model includes the massive distribution system which works for on line customers and equally important, Amazon lists 3rd party sellers list their products beside Amazon. Almost 2 million sellers offer products and they account for 56% of the Amazon’s sales.
The marketplace makes it harder to determine Amazon’s true influence on the retail industry. Amazon captures and reports only the fees it charges sellers to list, ship and market their goods, not the total money that flows through its business. The model is more profitable, but produces less revenue.
In terms of employees Walmart has 1.6 million workers while Amazon has 1.3 workers.
Linking to dividend paying stocks, as an investor you hope and expect the company you invest in will be successful for a long time and along the way the stock price rises and dividends are paid to you. The reality is over time, different models work better at different times. As you review your investments understand how the business model is working and will continue to work for customers and most importantly you.
There are more questions than answers, till the next time – to raising questions.