By Jim Tompkins
CEO, Tompkins International
Last night I received a post. The headline read "Countdown: World's Largest Ecommerce Giant Verses World's Largest Retailer". Well, we know the world's largest Ecommerce giant is Alibaba and the world's largest retailer is Walmart. So, I expected to see a comparison of Alibaba and Walmart. However, when I opened the link the headline shifted to "Countdown: World's Largest US Ecommerce Giant Verses World's Largest US Retailer". With the title change I expected to read a column on Amazon vs. Walmart. What headline should I be reading and what should I expect Alibaba versus Walmart or Amazon versus Walmart?
This continues to get worse. As I read the copy before the infographic it states "With 244 million active users Amazon is by far the largest online retailer in the world." First of all, Alibaba is the largest online marketplace in the world and secondly Amazon is only 56% an online retailer and 44% marketplace. This is very confusing. I went to bed and did not think about this further.
When I got up this morning I had four messages from colleagues that had forwarded me the same post. They all suggested I do a more robust infographic that shows Amazon, Walmart, and Alibaba. I thought this may be a good idea, but then as I further studied the posted infographic, I found a lot of misinformation. For example:
- Comparing the 54,100 employees at Amazon vs. the 2.2 million employees at Walmart is not relevant because the business models are extremely different.
- Comparing the net sales of Amazon $89 billion vs. Walmart's $482 billion is not accurate. The net sales number for Amazon is correct from an accounting point of view, but is not true as 44% of Amazon's sales are marketplace and other. These "retail sales" are really "net service sales" that are fees from commissions generated from outside merchants that sell on the Amazon marketplace, Amazon Web Services (AWS) , and other revenue sources. Therefore, if one looks at 56% of $89 billion, they get $50 billion in retail sales for Amazon. This leaves $39 billion of which $5 billion is AWS and $34 billion of Gross Merchandise Volume (GMV). If you assume a 10% commission fee to Amazon, this would equal $340 billion in GMV and thus "total retail sales" of $399 billion for Amazon vs. $482 billion for Walmart. If you assume a 13% commission fee to Amazon the "total retail sales" would be $434 billion. The comparison of $89 billion to $482 billion is incorrect and misinformation.
- A very funny comparison is the category "Additions" this is comparing new SKU's for Amazon vs. new stores for Walmart. Completely worthless information.
The continued misinformation could be further discussed, but I rest my case.
Further as I considered my friends idea for an infographic comparing Walmart, Alibaba, and Amazon I decided it would not be useful as it would be comparing apples, oranges, and bananas/grapes. Walmart being a pure retailer (apples), Alibaba being a pure marketplace (oranges), and Amazon being 56% retailer (bananas) and 44% marketplace (grapes), this would not be a useful comparison. In fact, it would result in misinformation rather than information about the comparisons.
My view is, infographics like this can be of great value and often are, but only when the information presented is accurate. Unfortunately, this is a case of good graphics but misinformation. I call this a "Misinfographic".