Amazon is a behemoth in the retail and technology industries, with a market cap exceeding $1 trillion and annual revenues of over $450 billion as of 2022. The company has built an ecosystem spanning e-commerce, physical stores, streaming media, cloud computing, artificial intelligence, and more. Amazon commands a dominant 40%+ share of the massive US e-commerce market.
However, Amazon faces strong competition across its many lines of business from capable and well-funded rivals. This in-depth article examines the top competitors challenging Amazon‘s leadership in the US market. We‘ll compare their strengths, strategies, market positions and future prospects in the battle against Amazon.
Leading Challengers in Retail and E-Commerce
In its core business of online and offline retail, Amazon contends with several heavy hitters:
1. Walmart
The world‘s largest retailer with over $570 billion in annual revenue, Walmart is Amazon‘s chief rival. In recent years, Walmart has invested aggressively to build its e-commerce capabilities to compete with Amazon online. These investments are paying off, with Walmart‘s US e-commerce sales growing 79% in fiscal 2021 to $64 billion.
Walmart‘s key strengths against Amazon are its massive scale, purchasing power and low prices. Walmart operates over 4,700 stores in the US, providing distribution points within 10 miles of 90% of the population. The retailer is leveraging these locations for curbside pickup and delivery of online orders. Walmart can also undercut Amazon on price across many categories.
Still, Walmart remains far behind Amazon in US e-commerce, with around an 8% market share vs Amazon‘s 40%+. Walmart.com also has much lower site traffic than Amazon.com. But Walmart‘s unmatched scale and recent digital surge make it the top challenger to Amazon‘s retail dominance.
2. Target
Target has found a winning formula by focusing on a curated product assortment, an appealing store experience, and convenient online ordering options. The retailer‘s revenue grew over 35% from 2019 to 2021, reaching $106 billion. Target‘s e-commerce sales have more than doubled over this period.
Target operates nearly 2,000 stores in the US and uses them to fulfill the majority of its digital orders. Leveraging its store network for pickup and delivery has been a huge advantage, driving digital sales growth of over 145% in 2020. Target‘s stores and e-commerce work seamlessly together, with top-notch user experiences across channels.
While Target is much smaller than Walmart overall, it is growing its e-commerce business even faster. Target has also cultivated an upscale brand that resonates with younger, urban consumers in particular. This positions Target well to keep gaining digital market share.
3. Costco
Costco‘s membership-based, low-price warehouse model has made it a retail powerhouse with fiercely loyal customers. The company operates over 800 massive warehouse clubs globally and has over 110 million cardholders. Costco‘s annual revenues reached $192 billion in 2021.
Costco offers a limited selection of products, but usually at unbeatable prices when bought in bulk. This, combined with its popular Kirkland Signature private label, keeps customers coming back. Costco has been slower than other retailers in moving online, but is now offering more items for delivery, often with free shipping.
Costco.com has much room for growth, contributing only about 8% of the company‘s sales currently. But Costco‘s super-low prices and membership model give it major advantages that even Amazon cannot match. As Costco builds out its online offerings, it could take more share in key categories.
Specialized Retail Rivals
4. Home Depot
Home Depot is the dominant retailer for home improvement in the US with over 2,300 warehouse-sized stores and $132 billion in 2020 sales. Home Depot has also built a substantial online business, with digital sales growing over 80% in 2020 to $19 billion.
Home Depot‘s advantages are its specialized expertise and authority in all things home improvement. Contractors and DIYers alike trust Home Depot for an unmatched selection of building materials, tools, appliances and know-how to get the job done. Home Depot is meeting customers‘ needs online and in-store.
While Amazon sells many home improvement products, it cannot match Home Depot‘s level of curation, service and on-site fulfillment. Home improvement is a huge category that Amazon has yet to crack, leaving Home Depot plenty of room to thrive both online and offline.
5. Best Buy
Best Buy is the go-to electronics retailer for many US consumers, with over 1,000 stores and $47 billion in annual revenue. Like other retailers, Best Buy has invested heavily in its digital capabilities, with e-commerce now generating over $18 billion in sales.
Electronics is one of Amazon‘s strongest categories online. But Best Buy offers expert customer service and support that Amazon cannot replicate digitally. The company‘s Geek Squad provides tech support, installation, and repair services to solve customers‘ problems. Best Buy‘s stores also let customers experience products before buying.
Best Buy has been a pandemic winner, with sales surging as consumers outfitted their home offices and classrooms with new technology. Yet the company still faces a stiff challenge from Amazon‘s unmatched product selection and pricing online. Continuing to differentiate through service and omnichannel capabilities will be key for Best Buy.
Formidable Foes in Streaming Media
6. Netflix
Netflix essentially created the category of streaming video on demand and remains the global leader with nearly 222 million paid subscribers as of 2022. The company spends over $17 billion annually to produce a huge variety of original series and films.
In contrast, Amazon Prime Video is more of a side benefit to the overall Amazon Prime subscription, which offers many other perks. Amazon spent about $11 billion on video and music content in 2020.
While Amazon does not disclose Prime Video subscribers, estimates put it around 175 million globally – far behind Netflix. Netflix‘s huge content budget and first-mover brand in streaming give it major advantages. But Amazon‘s ability to integrate video with Prime shipping and other benefits makes it a formidable rival in the streaming wars.
7. Disney
Disney was late to the streaming game but is already a major force with its Disney+ service reaching nearly 130 million subscribers less than two years after launching. When combined with Disney‘s other streaming offerings, Hulu and ESPN+, the company has over 190 million total subscriptions.
Disney‘s unparalleled library of beloved franchises and characters gives it a huge leg up in streaming. Disney+ is a must-have for families and Marvel or Star Wars fans. Disney plans to spend $14-16 billion annually on streaming content in the coming years to further boost its services.
Amazon has licensed some Disney content in the past, but Disney is increasingly keeping its top properties exclusive to its own streaming platforms. As consumers evaluate which services to keep in a crowded market, Disney‘s powerful brand and characters give it an edge over Amazon.
Battle in the Cloud
8. Microsoft
Microsoft is the second-largest cloud computing provider behind Amazon Web Services (AWS). Microsoft‘s Azure platform generated $45.5 billion in revenue during fiscal 2021, up 40% from the prior year.
Microsoft can leverage its deep relationships with large enterprise customers to drive Azure adoption and compete with AWS. Many companies already use Microsoft‘s Office productivity software and see Azure as a natural fit. Microsoft also offers more flexible pricing and hybrid on-premise/cloud options than AWS.
Still, AWS has a significant lead in the cloud infrastructure market, with around 40-50% share vs. Azure‘s 20% or so. Both companies are investing heavily in their cloud offerings and rapidly expanding data center locations globally. While AWS is ahead, Microsoft is a strong #2 keeping the pressure on.
Delivery Disruptors
9. Instacart
Instacart has emerged as a major player in grocery delivery, offering online ordering and delivery from over 600 national and local retailers in the US and Canada. The company‘s business surged during the pandemic, with sales more than doubling in 2020.
Instacart partners with supermarkets and uses a network of hundreds of thousands of gig shoppers to pick and deliver orders. This asset-light model has allowed Instacart to rapidly expand without operating its own grocery warehouses and vehicle fleets like Amazon does.
Grocery is a massive category where Amazon has invested heavily through its Whole Foods acquisition and Amazon Fresh stores. But Instacart‘s partnerships with most major grocers and extensive shopper network have enabled it to grow quickly. As online grocery demand persists post-pandemic, Instacart is well-positioned to compete with Amazon.
The Competitive Outlook
Amazon‘s many capable competitors each bring unique strengths to the fight:
- Walmart‘s scale and low-prices
- Target‘s curated assortment and powerful omnichannel model
- Costco‘s membership model and extreme value
- Home Depot and Best Buy‘s category expertise and in-store services
- Netflix and Disney‘s deep content libraries and production capabilities
- Microsoft‘s enterprise relationships and Azure platform
- Instacart‘s partnerships and gig workforce for grocery delivery
Several of these rivals are growing rapidly in the e-commerce and digital realms where Amazon is dominant. Walmart, Target, and Costco in particular are becoming formidable omnichannel competitors, leveraging their extensive store networks for online order fulfillment. Home Depot and Best Buy are also finding success meeting customers‘ needs online.
In streaming, Netflix remains far ahead for now and Disney has quickly established itself as another powerful player. In cloud computing, Microsoft is keeping the heat on AWS. And Instacart is leading a new wave of digital disruptors challenging Amazon in the massive grocery market.
Of course, Amazon has an incredible track record of innovation and expanding into new categories. The company continues to make big investments across its businesses. But Amazon also faces mounting antitrust scrutiny and calls for regulation that could constrain its growth going forward.
In the coming years, we are likely to see intense competition between Amazon and its rivals in the key battlegrounds of retail, streaming, cloud, and delivery. Established giants like Walmart and insurgent startups like Instacart will keep pushing the boundaries in their efforts to gain market share from Amazon.
While Amazon is unlikely to cede its leadership position anytime soon, it will have to work harder than ever to fend off its determined competitors. This fierce rivalry should ultimately benefit consumers in the form of more innovation, better products and services, and lower prices. Game on in the battle against Amazon.
