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Can Retailers Close in on Amazon (AMZN) this Holiday Season?

Christopher Vargas

Competition between major retailers and e-commerce companies is heating up as they elbow for position during Cyber Monday and beyond. Amazon AMZN has long posed a serious threat to conventional brick and mortar retailers like Target TGT and Walmart WMT as more consumers moved their shopping online.

In response to the change in consumer behavior, retailers have launched their own digital marketplaces to better compete in the modern online era. Some retailers have seen their efforts succeed.

Target reported a 31% increase in digital sales last quarter and Walmart saw its digital sales rise 41%. The success of these two retailers has put them in a position to compete on the digital front against Amazon, which has long dominated the lucrative space.

Are Retailers Closing in on Amazon?

The holiday shopping season started with a bang, according to data collected by Adobe ADBE, Online shoppers spent $7.4 billion on Black Friday 2019, a new record for online Black Friday sales.

On top of that, Adobe reported today that online sales on Cyber Monday surged 19.7% Y/Y to a record $9.4 billion. The record setting sales has retailers pushing harder to cash in on the growing e-commerce space. 

Target and Walmart have both seen success in their digital initiatives and have even outpaced Amazon recently. According to Edison Trends, Walmart and Target saw larger Y/Y increases in online consumer spending during the first two weeks of November. Walmart gained 51%, while Target followed closely behind with a 47% jump and Amazon came in at 32%.

Amazon boasts a vast logistics network that can provide speedy next-day delivery. Meanwhile Target and Walmart have found ways to incorporate their physical store presence, with their digital marketplaces. The retailers offer services like in-store pick up for items purchased online and Target offers Drive Up, which allows consumers to drive into the store lot and have their items brought out to their car.

While same-day fulfillment services have proven successful, groceries are where the two retailers have been able to separate themselves from Amazon. Walmart customers can do their grocery shopping online, and Walmart offers unlimited delivery for $98 a year or $12.95 a month.

Walmart’s 41% digital sales expansion in the third quarter was led by growth in online grocery shopping. Groceries is an area that Amazon has tried to establish itself in, but hasn’t found much success yet.

Considering the success that Target and Walmart have seen in groceries, it might be an area that retailers can enjoy a healthy lead over the e-commerce giant.

Best Buy BBY has also made its own improvements to its digital presence which has yielded some positive results. The electronics retailer is offering next-day delivery for select items which should help it better compete this holiday season. The company also uses its store locations as distribution centers which brings down the costs for deliveries and also makes the next-day delivery time possible.

Bottom Line

Amazon has long held the e-commerce throne and threatened the livelihood of retailers who undermined the threat that the company posed. The digital commerce titan offers consumers the convenience of getting all of their holiday shopping done online, which will still likely draw a large portion of consumers to its site this holiday season.

However, Target and Walmart have both seen substantial growth in digital sales as the retailers use their physical presence to offer convenient same-day fulfillment services. These services paired with the strength they have in the grocery space puts the retailers in a good position to cash in on the holiday season.

According to Statista, e-commerce is anticipated to grow to a $740.4 billion market in 2023, which represents a 26.02% increase from this year’s projected $547.7 billion. Target shares have outpaced Amazon, Walmart, and Best Buy YTD.

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Click to get this free report Amazon.com, Inc. (AMZN) : Free Stock Analysis Report Adobe Systems Incorporated (ADBE) : Free Stock Analysis Report Best Buy Co., Inc. (BBY) : Free Stock Analysis Report Target Corporation (TGT) : Free Stock Analysis Report Walmart Inc. (WMT) : Free Stock Analysis Report To read this article on Zacks.com click here. Zacks Investment Research