Breakingviews: Walmart sharpens as Amazon efficiency edge dulls

Walmart’s strengths are coming into sharper focus. The $270 billion retailer increased quarterly sales on Thursday. That pales next to its Seattle rival’s latest growth rate. But Walmart’s workers are as productive as ever while Amazon is employing many more and getting less in return.

The company led by Doug McMillon said the top line rose nearly 4 percent to $128 billion for the three months ended July 31. In the United States, comparable sales increased 4.5 percent, the strongest growth in 10 years. Amazon meanwhile had a scorching second quarter with nearly a 39 percent increase in revenue while its bottom line tallied $2.5 billion.

When it comes to efficiency, though, Walmart is closing the gap with its rival. For the fiscal year ending January 2018, average revenue for each of the company’s 2.3 million employees was about $217,000. While that figure has grown negligibly in the past five years, it’s a solid performance for the United States’ largest private employer in the face of e-commerce competition that has devastated many retailers.

Amazon enjoys higher productivity, but its edge is dulling rapidly. Last year its workers produced about $317,000 each in revenue, just half of the level of five years ago. That’s a consequence of headcount growing faster than sales. In 2017, Amazon’s top line rose 31 percent while its employee base jumped 64 percent.

Amazon’s ambitious expansion into delivery and other areas will keep adding to its payroll. The acquisition of Whole Foods injected more brick and mortar to its holdings and an additional 89,000 employees, or 16 percent of its workforce in 2017. A second headquarters, expected to be announced later this year, will swell its ranks by at least another 50,000. While its Amazon Web Services unit is increasingly profitable, the expanding weight of its core retailing operation is a drag on growth.

Walmart already shoulders a huge payroll and thousands of physical stores. It’s trying to juice e-commerce on top of that by spending $16 billion for India’s Flipkart and using its U.S. workforce for deliveries. American online sales rose 40 percent in the latest quarter. If the Bentonville, Arkansas outfit can pull off that balancing act, the comparison with Jeff Bezos’ shop should keep on improving.

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