Please ensure Javascript is enabled for purposes of website accessibility

Is Amazon Actually Losing Market Share?

By Adam Levy – Aug 21, 2020 at 8:30AM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Strong online sales growth from some big competitors disguises the overall market growth.

Competitors are starting to show progress in cutting into Amazon's (AMZN -0.77%) massive lead in e-commerce.

Walmart (WMT 0.43%) and Target (TGT -0.02%) reported blowout second-quarter earnings results with surging e-commerce sales. Walmart's online sales increased 97% while Target said its digital sales climbed 195% over the last three months. Costco (COST -0.15%) hasn't reported its earnings results yet, but it posted monthly e-commerce sales growth of 106%, 86%, and 75% in May, June, and July, respectively. Shopify, which counts hundreds of thousands of small merchants on its e-commerce platform, said its gross merchandise volume increased 119% last quarter.

Amazon, meanwhile, reported sales growth of "just" 48% for its online stores in the second quarter. When looking at its results by region, North America grew 43%. Its third-party seller services grew a bit faster at 52%.

With slower growth than its competitors, Amazon must be losing significant market share. But estimates from the U.S. Census Bureau suggest it might not be that bad for the market leader. E-commerce sales in the country grew 44.5% year over year last quarter, according to government estimates. That's only slightly faster than Amazon's North American sales growth during the same period and slower than its third-party seller services.

A truck with the Amazon Prime logo on the trailer.

Image source: Amazon.

Amazon's keeping good pace with the market

Amazon did a good job of keeping pace with the overall market in the second quarter. And that was a quarter where Amazon's fulfillment network was thrown into upheaval. 

It moved to prioritize fulfillment on items it deemed essential and asked merchants to halt shipments on nonessential inventory to its warehouses as it dedicated its footprint to essential goods. Meanwhile, operations at its warehouses were slowed after it took measures to help prevent the spread of COVID-19. Even Amazon's valued Prime members saw long delays for some shipments.

Amazon also pulled back on advertising and internal promotional efforts typically used to boost sales. And it had to delay its Prime Day shopping holiday, typically scheduled in July, as it worked to get its warehouses back up to speed.

Amazon doesn't report gross merchandise volume, and it doesn't break out its sales results by country. Therefore, it's impossible to know whether it grew faster or slower than the overall market based on publicly available data. But it seems like Amazon grew slightly slower than the overall market in the U.S.

When a company commands a near-40% market share, though, growing slightly slower than the rest of the market means there's a good amount of market share gains to be had. Even if Amazon grew about 10% slower than the overall market (say about 40% GMV growth), it'd open up around 1.2 percentage points of market share. And for competitors with around just 1% of the total market like Target or Costco, that's a huge opportunity to take share. Even Walmart, with a market share of around 5%, had a lot to gain.

Amazon should outperform other online retailers in the second half of the year

Importantly, investors should consider Amazon has mostly recovered from the shock of COVID-19. It's ramping up its warehouse capacity, starting to spend on advertising again, and it's planning for a Prime Day in October. All signs point to sustained demand for Amazon shipments and elevated revenue growth through the end of the year.

Meanwhile, there are indications Walmart's sales growth may fall back down a notch. The company reported comparable-store sales growth of 4% in July compared to 9.3% for the full quarter. Online sales are a key contributor to comparable-store sales. Management cited uncertainty about consumer spending after stimulus checks run out, as well as an abnormal back-to-school shopping season.

While Amazon might have lost a little bit of its dominant share of e-commerce (maybe), it looks more like a short blip on its steady march to a greater and greater share of online retail.

John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool's board of directors. Adam Levy owns shares of Amazon. The Motley Fool owns shares of and recommends Amazon and Shopify. The Motley Fool recommends Costco Wholesale and recommends the following options: short January 2022 $1940 calls on Amazon and long January 2022 $1920 calls on Amazon. The Motley Fool has a disclosure policy.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Amazon Stock Quote
Amazon
AMZN
$93.41 (-0.77%) $0.72
Walmart Inc. Stock Quote
Walmart Inc.
WMT
$153.07 (0.43%) $0.65
Target Stock Quote
Target
TGT
$163.38 (-0.02%) $0.03
Costco Wholesale Stock Quote
Costco Wholesale
COST
$533.66 (-0.15%) $0.83

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
356%
 
S&P 500 Returns
118%

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 11/27/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.