This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.
Amazon (NASDAQ: AMZN) is set to overtake Walmart (NYSE: WMT) as the biggest U.S. retailer by 2025, according to a new report.
Yet just like Major League Baseball did to Roger Maris after he passed Babe Ruth's home run record in 1961, Amazon will need to tack an asterisk onto the achievement, because its growth isn't the milestone it initially appears.
In a report by Bloomberg, e-commerce data company Edge by Ascential says within four years consumers will purchase $632 billion worth of goods from Amazon, compared to $532 billion at Walmart. This is where the caveat is needed.
Amazon and Walmart have different business models. Where the e-commerce giant started off as an online retailer, today it operates more like a flea market charging rent to its 2 million or so third-party retailer tenants, who account for the vast majority of those sales.
In contrast, despite Walmart having a growing e-commerce presence and third-party platform, its sales are still mostly its own. When comparing apples to apples, then, Edge by Ascential admits Walmart will continue to be the retail behemoth it is today.
To account for the different business models, the data analytics company examined the gross merchandise volume of the two companies, a metric that measures how much consumers spend, regardless of where the product originates. In that way, Amazon is a juggernaut whose growth Walmart will be unable to impede by investing in its own digital sales platform.
Even though Walmart's online sales grew 79% last year, it's clear Amazon remains a continuing threat, which is why last year it launched its own Prime-like member loyalty program, Walmart+.
When Amazon is declared the biggest U.S. retailer in a few years, look at the fine print.
This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.
