Amazon (AMZN) is set to hit a major milestone in 2024: Becoming the largest retailer in the US, according to JPMorgan analysts Doug Anmuth and Bryan M. Smilek.
If this comes to pass, Amazon will be unseating Walmart (WMT) as the country's largest retailer. It would be a seismic shift, one driven by increased e-commerce penetration, faster delivery times, and the stickiness of Amazon Prime. JPMorgan estimates show that, in 2023, Amazon's gross merchandise volume, or GMV, will grow 11.6% year-over-over to $477 billion.
This kind of growth shows the sort of resilience that Wall Street has been hoping to see out of e-commerce businesses, which had a tough 2022. Though e-commerce businesses like Amazon saw major booms during the pandemic, last year saw a pullback. It was the first year since 2009 that US e-commerce grew less than 10%, the analysts noted, adding just 8.5% year-over-year, "likely driven by macro pressures, the resurgence of [brick-and-mortar] retailers, and the shift toward omnichannel retail following the pandemic," Anmuth and Smilek wrote on June 20.
This year, Amazon's GMV is growing due to "solid growth in under-penetrated categories" like grocery and apparel, "faster delivery speeds, with 2023 tracking toward Amazon’s fastest delivery speeds ever," and the "Prime flywheel," the idea that the company's much-discussed subscription service builds momentum at every step in the experience, the analysts wrote.
Amazon's e-commerce business will also benefit from increased business-to-business capabilities, new fintech offerings like Buy With Prime, and estimated growth in the number of third-party sellers operating in the company's marketplace, they added.
JPMorgan estimates that there will be about 300 million Prime members globally by the end of this year. In 2021, then-CEO Jeff Bezos said the company had "more than 200 million Prime members worldwide."
Amazon also has a massive grip on the e-commerce marketplace and, at the end of 2023, JPMorgan analysts expect the company's e-commerce market share to be 42.2%, an increase of 106 basis points year-over-year.
JPMorgan's bullishness on Amazon also ties back to the belief that the company will leverage generative AI in its e-commerce operations, suggesting that a "ChatGPT-style product search would create an interactive conversational experience" which the analysts believe would "enable Amazon other retailers to provide a more personalized customer experience" and that AI could also "could enable Amazon and other retailers to leverage a breadth of customer purchase history and data and enhance personalized recommendations."
Big tech government scrutiny
There's a catch, however: in recent months, so-called "big tech" companies, Amazon included, are seeing increased scrutiny from the federal government. Vermont Sen. Bernie Sanders said he is investigating what he called Amazon's "abysmal safety record" and, though it's far from the first time Sanders has gone after Amazon, it's certainly one of the most formal, and is unlikely to be the last.
Additionally, last week the Federal Trade Commission (FTC) sued Amazon, alleging that the company has been tricking customers into signing up for Amazon Prime and making it harder to cancel those subscriptions. The lawsuit is the byproduct of an FTC investigation that began back in 2021. For Amazon, it's a gut-punch of a lawsuit, alleging that the company violated several consumer protection laws and that the court should issue an injunction to stop Amazon's Prime subscription practices.