Amazon.com should surpass Walmart in 2022 to become the largest U.S. retailer, J.P. Morgan analyst Doug Anmuth predicts in a new report.
In 2020, Anmuth notes, Amazon (ticker: AMZN) had estimated U.S. gross merchandise value of $316 billion, up 45% from a year earlier, a sharp acceleration from 22% in 2019. Last year, Amazon was the clear No. 2 retailer after Walmart (WMT), which grew GMV 10%, to $439 billion. (Note that Amazon doesn’t actually report GMV, so the number in its case is an estimate.)
Anmuth sees Amazon surpassing Walmart in GMV next year, driven by continued strong growth. He notes that Amazon’s share of the U.S. e-commerce market reached 39% in 2020.
In fact, Anmuth projects Amazon will post overall revenue for calendar 2022 of $580.2 billion, which would be slightly more than the $567.6 billion Street consensus forecast for Walmart for the January 2023 fiscal year. He projects Amazon’s U.S. GMV, excluding physical stores, will reach $377 billion this year, $457 billion next year, and $547 billion in 2023.In the 2021 first quarter, Amazon reported 44% sales growth.
The analyst estimates that Amazon has more than a quarter of the e-commerce market in many categories, ranging from 25% for jewelry and watches to 80% for books and magazines. The company has half the online market for consumer electronics, 48% for consumer packaged goods, and 39% for apparel and accessories.
In Anmuth’s view, the biggest growth opportunities for Amazon and other online retailers are in consumer packaged goods, apparel, and furniture and appliances. He sees consumer packaged goods—including groceries—as the single largest opportunity, with only 7% of overall sales online, while also growing the fastest: Online sales in the category were up 79% in 2020. (It’s also the single largest category of consumer retail sales overall.)
Apparel sales fell 4% in 2020—we were all wearing pajamas, apparently—but the analyst sees a rebound ahead. Anmuth thinks online penetration in apparel can increase from 23% to $30%. He notes that furniture and appliances are 11% of overall retail spending but only 7% of e-commerce spending, with 11% of category sales online.
Anmuth points out that U.S. Commerce Department data shows that U.S. e-commerce spending grew 31.8% in 2020, the 11th consecutive year of double-digit growth. E-commerce in 2020 represented 19% of adjusted retail sales, he notes, up from 15.4% in 2019. (The data exclude food services, autos, and gas stations.) His view is that the pandemic pulled forward three years of e-commerce growth—and he sees further expansion of e-commerce penetration this year. Anmuth thinks the total can reach 30% by 2025, and eventually 40% to 50%.
“While e-commerce gains during the pandemic were initially driven by the closure of brick-and-mortar stores or consumers hesitant to shop in-person, e-commerce has remained strong into re-opening,” he writes in the research note.
Amazon is Anmuth’s top pick, with an Overweight rating and $4,600 target price. Its stock was down 0.6%, at $3,364.74, in recent trading, and up 3.3% for the year.