Better local presence: There is no doubt that both Walmart and Costco have a much stronger local presence with big stores all across the US and in many other countries. That is a major advantage.
Cost structure: (employees, fixed costs, etc) On this front, the advantage for Amazon is very clear. It has fewer locations, employees and has been able to open warehouses with the overall goal of keeping costs low. It has also started using robots in its warehouses.
Amazon Has An Insurmountable LeadThe major advantage for Amazon over its competitors is that it was able to start off its business at square zero. It built everything geared towards this new business environment:
-Digital Products: Amazon has built a strong business around digital products thanks in large part to its Kindle. It has been able to sell digital books, streaming videos, etc.
-Same-day delivery: Amazon has been building warehouses in a very strategic way in order to be able to quickly offer same-day delivery to as many customers as possible. Walmart and Costco built with a completely different mindset as they focused on which stores would get enough business.
-Technology Advantage: Building a website that sells products is easy. Having technology that will make it easy to target consumers with the right offers, to make purchases extremely easy, to have an active community that generates millions of product reviews, that is much more difficult and from that perspective, Amazon is at least a decade ahead.
Walmart and others will surviveI don’t think that in the long term, Walmart and Costco will be able to successfully compete with Amazon but those two players will certainly remain major, very relevant players. We’re not near the day where consumers stop going to physical stores so having a strong local presence obviously matters a great deal.
Disclaimer: No positions on WMT, AMZN or COST