Topics Covered: March 6, 2023
- Comparing Amazon, Walmart, and Target through a digital lens
- Instacart grows 39% in ‘22
- Kroger comps +6.2% in 4Q
- Instacart adding ChatGPT to app
- Target comps 0.7% in 4Q
- Michaels adds a marketplace
Analyzing Digital Growth Across Amazon, Walmart & Target
Now that Amazon, Walmart, and Target have all reported their full year 2022 results, we analyzed how they’re doing through an eCommerce lens.
TL;DR
- Amazon and Walmart outperformed the market in 4Q22 and ’22, while Target underperformed
- Category mix (e.g., % of sales from grocery) explains performance differences more so than execution or strategy
- All three retailers’ digital businesses are projected to grow at similar rates in ‘23
- Digital is projected to account for two-thirds of Walmart and Target dollar growth in ‘23
- When including Amazon with Target & Walmart, digital sales are projected to account for 88% of dollar growth in ’23
eCommerce leaders should read on for a clearer understanding of what’s actually driving performance differences and what to expect for ’23.
Continue Reading Here...
For the Nerds
Instacart grew rapidly in ’22: Instacart reportedly grew revenue 50% Y/Y in 4Q22 and 39% Y/Y for the full year. Sales growth consisted of a 16% increase in GMV growth, along with the remainder driven by advertising, memberships, and contributions from acquisitions. It also reportedly grew gross profit by 80% Y/Y during 4Q.
There’s a fair amount of skepticism about the future of Instacart amongst grocery leaders. But these results are quite positive when compared to DoorDash growing its GMV by 27% in 2022 or Walmart.com’s digital performance up 13%.
Feedback from CPG leaders we’ve connected with suggests they are seeing positive advertising results but that ad load is moving quite high. There is also a great deal of uncertainty from CPG companies on whether grocers will continue to work with Instacart or go the independent route. (WSJ)
Kroger reports 4Q results: Kroger's comps (+6.2%) came in ahead of expectations and digital sales (+12%) accelerated for the second quarter in a row.
Management reiterated its commitment to its Leading with Fresh, Accelerating Digital strategy which it believes will serve it well regardless of the macroeconomic backdrop. The company expects 2023 comps of 2.5-3.5% excluding the impact from cancelling its Express Scripts partnership.
The results were generally seen as positive although the company acknowledged its eCommerce performance has failed to live up to the high expectations that were set at the peak of pandemic driven online demand. (Stratably)
Instacart adds ChatGPT to app: According to the WSJ, “Instacart will use the chatbot to power a new search engine designed to respond to users’ food-related questions, such as asking for recipe ideas and ingredients, or healthy meal options, the San Francisco startup said Wednesday.” The company hopes to help reduce the “cognitive load” inherent to grocery shopping.
This is an exciting experiment for Instacart and online retail more broadly. There’s been much talk about how search results on Google or Bing will change, but there’s also the potential for Amazon search results or Walmart search results to change as well.
How this impacts product detail page content, digital shelf measurement and advertising remains to be seen. We’ll keep watching! (WSJ)
Target reports 4Q results: Both comps (+0.7%) and operating margins (3.7%) in 4Q came in ahead of conservative expectations. In addition, management feels positive about where it is with inventory, down 3% in total and down 13% in problematic discretionary categories on a year-over-year basis.
Management provided a wide range of guidance for both the first quarter and the full year. Both 1Q and full year comps are expected to range from a decline of low single digits to an increase of low single digits, with operating margins of 4-5%.
The company went on to say it expects to reach its long-term operating margin goal of 6% as early as 2024. (Stratably)
Michaels adds a marketplace: In the hunt for incremental assortment, Michaels is the latest retailer to add a curated marketplace to its offering. The company indicated its listed items now reach more than 1mm arts and crafts related goods, up from 250,00 pre-marketplace launch.
This curated marketplace focused on a specialty category seems more likely to work compared to a grocer launching a general marketplace or a mass retailer taking too curated of an approach.
The more Michaels can remove barriers to entry (i.e., the application process) while protecting the user experience the more it will attract even greater assortment, helping fuel a data and advertising flywheel pioneered by Amazon. (Michaels)