---
title: "Amazon Officially Surpasses Walmart: How Will Offline Supermarkets Respond?"
description: "Amazon has overtaken Walmart in retail sales, becoming the largest retailer outside China, driven by the rise of online shopping. Offline supermarkets face challenges from e-commerce and community group buying, but their scale and experience in fresh produce may help them adapt."
author: "锋见"
publisher: "New Distribution"
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published: "2021-08-30"
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# Amazon Officially Surpasses Walmart: How Will Offline Supermarkets Respond?

> Amazon has overtaken Walmart in retail sales, becoming the largest retailer outside China, driven by the rise of online shopping. Offline supermarkets face challenges from e-commerce and community group buying, but their scale and experience in fresh produce may help them adapt.

**Click to read the original article for details**
Source: Feng Jian (ID: feng_keji)
The rise of online shopping is changing our consumption habits, with more and more products moving online to meet the increasingly diverse needs of online shoppers.
Facing the aggressive advance of online shopping, offline supermarkets are not idle either; they have launched their own e-commerce platforms, seeking breakthroughs through diversified shopping methods. However, this does not seem to stop the pace of online shopping development.
According to data from FactSet, "In the past year, consumers spent over $610 billion on Amazon, while Walmart's sales were approximately $566 billion. Amazon's retail sales have surpassed Walmart, making it the largest retailer outside China."
Amazon's surpassing of Walmart seems to have come sooner than analysts expected. Previously, analysts at JPMorgan Chase indicated that Amazon might surpass Walmart in 2022 to become the largest retailer in the U.S.
Online shopping is one of the future development trends, as exemplified by the rise of Alibaba, JD.com, and Pinduoduo.
In the U.S., the rivalry between Amazon and Walmart has been long-standing, and Amazon's gross merchandise volume (GMV) has become a closely watched figure. From lagging behind, to approaching, and finally surpassing, this process symbolizes the competition between online and offline retail in the U.S.
In China, online shopping has developed even faster. In 2016, media reported that Alibaba surpassed Walmart to become the world's largest retailer. According to Alibaba's fiscal year 2020 annual and Q4 financial report, the GMV of Alibaba's digital economy's consumer business reached RMB 7.053 trillion, exceeding $1 trillion.
Not only online shopping, but the continuous development of the internet is also integrating services and products that were previously difficult to digitize into the internet system through new forms such as community group buying. These measures have formed a new wave of impact on offline supermarkets. So, has the winter for offline supermarkets truly arrived?
# **The Winter of Offline Retail?**
For a product to move from offline to online sales, it must at least meet the following two basic conditions:
First, it should be easy to store and transport. The product should be easy to pack centrally and suitable for long-distance shipping, with low packaging costs and low loss rates during transportation, ensuring a certain sales profit.
Second, the product's quality assurance should be controllable, less affected by uncontrollable factors such as time and weather, reducing customer return rates.
Based on the above conditions, it can be seen that large-scale industrial products such as clothes, shoes, and daily necessities are easier to sell online.
Fresh products, however, cannot be standardized in terms of production, quality, and transportation, which has led internet companies to enter the fresh food sector later, and e-commerce penetration remains relatively low.
According to data compiled by the Industry Information Network, in 2019, the domestic fresh food sales channels were still dominated by farmers' markets, accounting for 73%, with supermarkets as the second channel at 22%. In contrast, fresh food e-commerce accounted for only 3% of the market, indicating an underdeveloped e-commerce track.
The low e-commerce penetration of fresh food is also related to our dietary and consumption habits. Our basic requirement for fresh food is, of course, freshness, and the habit of buying "moderate amounts frequently" meets our demand for ingredient freshness.
**Fresh food once became a weapon for offline supermarkets against online e-commerce, but this tactic is becoming less effective.**
Among offline supermarkets, Yonghui Superstores is known for its fresh food business, with fresh products occupying over 40% of the store area, including daily necessities such as vegetables, fruits, meat, eggs, and fish. Sales of fresh agricultural products account for over 50% of total sales.
In the "2020 China Chain Top 100 List" released by the China Chain Store & Franchise Association, Yonghui ranked fourth, ahead of Gaoxin Retail (RT-Mart and Auchan), China Resources Vanguard, Walmart (China), and Lianhua Supermarket.
However, Yonghui seems to be struggling now. Fresh products cannot serve as Yonghui's trump card against e-commerce, as major e-commerce platforms are trying every means to increase penetration in the fresh food sector.
In Q1 2021, Yonghui's quarterly report showed revenue of RMB 26.334 billion, a year-on-year decrease of 9.99%, and net profit of RMB 23.318 million, a year-on-year decrease of 98.51%. The rapid decline in net profit can be described as a Waterloo, considering that in Q1 2019, Yonghui's net profit was RMB 1.124 billion, and in Q1 2020, it grew to RMB 1.568 billion.
The decline in Yonghui's net profit may be related to the fierce attacks from community group buying or fresh food e-commerce platforms such as Dingdong Maicai, Miss Fresh, Meituan Maicai, and Duoduo Maicai.
Taking Dingdong Maicai as an example, according to its prospectus, its revenue in 2019 was RMB 3.88 billion, and in 2020 it grew to RMB 11.336 billion, a growth rate of 192.2%.
Some are happy, some are sad, but from the current situation, it is still difficult to directly conclude that the offline retail industry has fully entered winter. The offline retail giants, with years of accumulation, still have the opportunity to turn the tide.
# **A Big Ship Is Hard to Turn**
In early August this year, Fortune magazine released the 2021 Fortune Global 500 list, with Walmart ranking first for the eighth consecutive year, while Amazon and Apple ranked third and sixth, respectively. Walmart's consistent top ranking seems to prove the unique market value of offline retail.
If measured by market capitalization, which better reflects capital market judgment, Walmart's current market cap is $422.283 billion (approximately RMB 2.7 trillion), higher than most domestic internet giants, such as Meituan's market cap of HKD 1.34 trillion and Pinduoduo's market cap of $99.574 billion.
Yonghui Superstores, listed domestically, has a market cap of RMB 34.993 billion, which is also higher than Dingdong Maicai's market cap on the U.S. stock market ($4.608 billion, approximately RMB 29.85 billion).
**The difficulty for offline supermarket giants lies in the fact that a big ship is hard to turn. Having developed over a long period to reach such a scale, offline supermarkets cannot adjust their business as aggressively as emerging internet companies, which use massive spending to acquire users and open up new markets.**
In addition to exploring online development models, offline supermarkets often collaborate to expand online, including Yonghui, China Resources Vanguard, and Walmart, all of which have partnered with JD Daojia, leveraging JD's logistics system to improve delivery efficiency and reach more users.
After community group buying companies were summoned for regulatory talks, the "Nine No's" new regulations for community group buying were introduced to prevent companies from engaging in predatory pricing or price gouging to gain competitive advantage, or using big data to "kill familiarity" after establishing market dominance, thereby undermining the market competition environment and harming consumer rights.
The "Nine No's" regulations not only prevent vicious competition among community group buying companies but also give offline supermarkets time to rethink their corporate strategies.
From the current perspective, domestic offline retail giants urgently need to find a development model suitable for themselves.
In the trend of internet development, they should form their own moats. Under the impact of community group buying and fresh food e-commerce, they should find or strengthen products or services that are inherently beneficial for offline consumption, such as consolidating offline fresh food markets and focusing on family experiential consumption.
In the fresh food sector, which is not yet fully internetized, every player has infinite possibilities. Offline supermarkets, with years of operation, have advantages over online internet companies in terms of fresh product supply channels, transportation channels, and offline promotion.
**A big ship is indeed hard to turn, but once the bow is adjusted to the right position, it is sure to stir up a mighty wave.**
**PS**: From September 23 to 25, 2021, the 2021 (4th) China FMCG Conference, hosted by New Distribution, will be held in Shanghai. Some of the confirmed heavyweight guests include: **1. Tao Shiquan, Founder of Jiangxiaobai; 2. Yao Xuhong, General Manager of Meiyijia Holdings Co., Ltd.; 3. Lu Xiuqiong, Global Expert Partner at Bain & Company and former Vice President of Marketing for Coca-Cola China; 4. Chen Xiaodong, Senior Vice President of Nestlé Greater China; 5. Zhang Fujun, President of Lee Kum Kee Sauce Group China; 6. Bi Chaojiao, General Manager of China Resources Snow Breweries (China) Marketing Center; 7. Yang Hongbin, Vice President of Junlebao Dairy Group; 8. Zhang Yipeng, General Manager of Kuaishou E-commerce SKA Brand Operations Center; ....**
**A grand gathering for FMCG professionals, you must be there!**
**Are you "watching" me?**


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