Moody’s: Walmart, Best Buy leading charge against Amazon

Brick-and-mortar retailers such as Walmart and Best Buy are not only surviving online, but are thriving due to their sizable physical assets and digital investments.



That’s one of the main findings of a new report by Moody's Investors Service, which says that while Amazon keeps raising the stakes online and has a decade-plus advantage over other retailers in e-commerce, it still faces intense competition from the likes of Walmart and Best Buy, who are raising the bar online for other physical merchants.



The report cites Walmart's recent acquisition of Jet.com, which, while not a threat to Amazon's position, provides Walmart a speed advantage in boosting online growth by leveraging Jet's ready-made platform. Best Buy is an example of a retailer that continues to successfully transition online, with penetration now approaching 20% of total sales.



But even as these same retailers have made notable progress in bridging the gap between physical stores and online, more work lies ahead to increase their online relevance as they strive to be in the conversation with Amazon.



"We believe this pitched battle is still in its early stages, and that online retail sales will eclipse 20% of total retail sales in seven years -- more than double today's roughly 9%," said Moody's lead retail analyst Charlie O'Shea. "Online sales still remain a relatively small drop in the retail revenue bucket -- although it is also proving to be by far the fastest-growing sector as brick-and-mortar focuses more resources on this channel."



The report, “Walmart, Best Buy are Leading Brick & Mortar Online Fight as Amazon Ups Stakes," finds that the buy online/pick-up in store for same-day availability model is a powerful tool for brick-and-mortar retailers in the competition for consumer dollars. The model, which is estimated to facilitate 40-50% of all online sales by brick-and-mortar merchants, empowers retailers to unlock working capital as it helps facilitate inventory optimization, according to Moody’s.



The report also sounds a note of warning as it cautions that there is still far too much retail square footage overall, calling the amount for non-food/non-auto-related retailers “excessive.”



“We are not in the camp that believes mass store closings are in order, but rather, think that the 'fleet' must be repurposed, with some store closings a likely by-product," said O'Shea. "When properly deployed, physical locations are a definite asset in the multichannel world, as they represent touch-points for the consumer, as well as distribution points for the retailer."