Let’s get this out of the way first: Walmart and Amazon are both incredible companies. CPG firms need to prioritize their relationships with both retailers.

Many brands are still avoiding working with Amazon, and that is a mistake they need to fix immediately. Depending on where you are on your e-commerce journey, you may need to read this primer first: Why Every CPG Brand Needs an Amazon Marketing Strategy.

It’s also important to remember that although these two retailers are direct competitors, and the media tie them together in e-commerce narratives, they are fundamentally very different organizations. Furthermore, each has different pros and cons that should be considered when deciding which to place as your brand’s #1 priority. Below, we’ll explore the strengths and weaknesses of partnering with each retailer.

Put All Your Eggs in One Basket

Priority: Walmart

If a CPG company can only focus on one e-commerce retailer, it should be Walmart. Walmart consistently registers larger order sizes and has a bigger basket size per customer. Additionally, Walmart customers are already purchasing weekly household staples from the retailer. Because of this, CPG brands that work with Walmart are more likely to receive a bigger sales halo from consumers who are open to purchasing new and different products than with Amazon, where consumers typically search for products by brand name.

Walmart is also more of a hands-on partner. It has more focus as an organization than Amazon, which has hundreds of projects and initiatives at any given time. Since Amazon has more going on, it’s easier for brands to get lost in the shuffle. Additionally, most of Walmart’s initiatives are relevant to CPG organizations. A much smaller percentage of Amazon’s are applicable to CPGs.

Furthermore, Walmart is more comfortable with a few brands gaining a significant amount of the market share for each category. In the 1990s and 2000s, it wasn’t uncommon for a brand to attribute 40+ percent of its sales to Walmart. Although there is more parity today, many brands still attribute a high percentage of their revenue to Walmart.

It’s not likely that Amazon will ever allow a single brand to carry as much weight as Walmart does. Beyond the endless choice it offers, if Amazon saw that a brand was attributing nearly half of its sales to the platform, it is likely to create a private-label version of the product and cut into the dominating brand’s market share.

Walmart has historically pushed hard on CPG companies for one-of-a-kind products, lower costs, and extended payment periods. However, the company is unlikely to completely ignore its relationship with a brand, cannibalize its business, or change its revenue to zero overnight. There’s a chance Amazon does just that.

Lastly, CPG brands are more critical to Walmart than Amazon. Amazon doesn’t necessarily need a brand; Walmart does. GlobalData notes that food and grocery sales account for 54 percent of Walmart’s U.S. revenue. Food and grocery only accounts for 3 percent of Amazon’s U.S. sales. If we add in Whole Foods and ignore all of Amazon’s services revenue, food and grocery is still only 27 percent of the company’s U.S. total.

Hitch Your Wagon to a Shooting Star

Priority: Amazon

According to a report from Profitero, “58% of brands in 2017 had a dedicated account lead for Amazon. In comparison, 28% of brands had a dedicated Walmart.com lead.”

Part of the reason for this may be that Amazon is unique and that relationships are more challenging to navigate than Walmart.com. But Amazon’s growth is also skyrocketing in a way that Walmart can only dream. It’s likely that many CPG firms are prioritizing Amazon both to figure out a partnership and to watch their brands’ sales rise as Amazon’s sales rise.

If it continues on its current path, Amazon will be larger than Walmart in a few short years. Unlike Walmart, Amazon doesn’t limit the items that it sells. Furthermore, it has business units and significant projects that Walmart will never engage in. Amazon Web Services, for example, the company’s cloud computing group, is responsible for 11% of total revenue. Amazon is also working on movies, TV, music streaming, drones, delivery and fulfillment. It is even venturing into healthcare.

Although every one of Amazon’s ventures may not be directly applicable to CPG firms, some will be incredibly interesting and relevant. Johnson and Johnson, CVS and Pfizer are certainly keeping a watchful eye on the company’s healthcare developments, hopeful that they can benefit in the long run.

Walmart has taken a more aggressive approach to innovation over the last three years, but growth and innovation is within Amazon’s DNA in a way that Walmart can’t match.

Brick and Mortar Dominance

Priority: Walmart

Clothing, footwear, electronics, home goods, furniture, baby and beauty categories are all important for Walmart and Amazon. However, grocery is undeniably the most essential. The main reason is the incredible amount of revenue attributed to the category. Food and grocery was responsible for $1.2 trillion in sales during 2017. This accounts for 35 percent of U.S. consumers’ total amount of money spent at retail ($3.5 trillion).

Compare that number to all U.S. e-commerce sales ($453.46 billion), and we can see that grocery is a massive piece of consumers’ retail expenditure. Because of this large revenue potential, it is likely that the company that figures out the modern grocery experience is the one that will be the winner across all retail categories. This modern experience is still yet to be defined.

GlobalData notes that 96% of grocery sales are purchased or picked up in a store. This highlights how important brick-and-mortar stores are. Walmart will have a stronghold on the physical store experience for the foreseeable future. The company has an impressive 5,600 U.S. stores, most of them between 150k and 200k square feet. Amazon has some catching up to do, with its 436 Whole Foods stores at an average of 50k square feet.

Beyond the scope and size, brick and mortar is Walmart’s heritage, and it’s what it does best. Stores allow consumers to touch, feel and view products in a way that isn’t possible yet for e-commerce. This enables Walmart to win when it comes to multi-touchpoint convenience. Convenience is defined differently from one consumer to the next. Some want fast delivery, free shipping, the ability to order online and pick up in store, drive-thru pickup, or a pure store experience. Walmart’s stores allow consumers to mix and match their definition of convenience. That’s an area that Amazon is still catching up to.

E-commerce Excellence

Priority: Amazon

Walmart may be the clear winner in brick and mortar, but Amazon is light-years ahead from a pure e-commerce perspective. For any brand that is focused only on e-commerce, Amazon is the retailer to prioritize.

GlobalData notes that Amazon accounted for a 40 percent share of all 2017 spending in e-commerce. It was singularly responsible for more than half of e-commerce growth across all retailers.

E-commerce is Amazon’s legacy, and it’s what they do best. Amazon grew by $100 billion in e-commerce revenue over the past two years. At $18 billion, Walmart’s growth was impressive but minuscule in comparison.

Amazon is also changing the definitions of what e-commerce means and innovating at a rapid pace. Earlier this year, the company announced that it had 100 million Prime members, and Kantar predicted that more than half of U.S. primary household shoppers would be Prime members by the end of 2018. Furthermore, ownership of Alexa-powered devices (Amazon’s voice assistant) is likely now reaching a similar 100 million user mark. During last year’s holiday shopping season alone, the company sold “tens of millions” of Alexa-powered devices.

Amazon’s e-commerce dominance also allows it to sell a wider product assortment. Small, niche CPG companies should start with Amazon as their #1 priority. With lower revenue totals, they are more likely to gain traction with Amazon than with Walmart, where it can be challenging to get attention when you have lower stocks and fewer products available to sell.

It is becoming increasingly clear that Amazon and Walmart will be the two leading titans in U.S. e-commerce. It’s essential to build and maintain a relationship with each retailer. Furthermore, it’s important always to remember that these retailers are diametrically different, even though we often lump them into the same basket. They have different strengths and limitations that CPG brands should consider when determining which one to prioritize time and resources towards. A well-thought-out Amazon and Walmart strategy can be the difference between success and failure for any CPG brand.