Walmart captured 20.8% of all U.S. grocery spending last quarter. Amazon captured 2.9%. By that metric, the largest retailer on earth has an unassailable fortress. Those grocery aisles are also a trap.
This is the defining tension Walmart brings to its earnings report on Thursday, August 20, 2026. A new report from PYMNTS Intelligence reveals a massive, and widening, split in U.S. retail. Walmart owns the weekly grocery trip. Amazon increasingly owns everything shoppers buy beyond it. The retailer’s core traffic advantage is becoming a critical monetization weakness.
The report finds: “Walmart’s stores remain a powerful destination for food. Amazon, however, has built larger shares in many goods that shoppers research, order and have delivered. Grocery functions like the front door to Walmart’s business, but too few shoppers continue into the rest of the house.”
The data is stark. In the first quarter of 2026, Walmart’s share of U.S. consumer spending in “trip” categories, led by groceries, reached 10.3%. Its share in “order” categories, things like furniture, electronics, and apparel, was 5.9%, a gap of more than 43%. That distance has grown more than fivefold since 2019. Walmart gets you in the door for milk and bread, but fails to convert that visit into a sale for a new TV or a sofa.
The Grocery Aisle Is a Trap for Walmart
Walmart’s grocery dominance is structural and durable. It commands over one-fifth of the market, a lead of nearly 18 percentage points over Amazon. This isn’t just market share. It’s a massive weekly traffic engine, serving around 270 million customers weekly, according to supplementary analysis. That volume underpins its entire logistics network and low-price perception.
But grocery is a notoriously low-margin business. It runs on high volume and thin profits. Walmart’s advantage is powerful, yet underused. The store traffic is phenomenal, but it’s traffic for a loss leader. The real retail profit pools are in the discretionary categories shoppers are increasingly buying elsewhere. Walmart’s grocery lead, while insurmountable for competitors, has inadvertently created the perfect conditions for Amazon to poach the profitable part of the shopping cart.
How Amazon Capitalizes on Walmart’s Own Parking Lots
The consumer behavior is simple, and the data proves it. A shopper drives to Walmart, fills a cart with low-margin essentials, and checks out. The mental transaction is complete: the “chore” is done. Then, often while still in the parking lot or later at home, that same shopper opens their phone. The mindset shifts from “chore” to “shopping.” They need a new blender, a book, a garden hose, or a pair of jeans. They open Amazon.
The PYMNTS report quantifies Amazon’s conquest. It leads Walmart by nearly 28 percentage points in sporting and hobby goods, music, and books. Its lead is about 24 points in electronics and appliances, 13 points in furniture, and 11 points in clothing. Amazon has successfully inserted itself as the default for considered, higher-margin purchases. Walmart’s store traffic is, effectively, generating leads that Amazon closes digitally.
This represents a fundamental breakdown of the supercenter’s original promise: one-stop shopping. Walmart built an empire on the premise that its aisles would capture the entire basket. Amazon has disaggregated that basket, intercepting the valuable half with superior convenience and selection online.
The Margin Math That Keeps Walmart Execs Up at Night
For investors, this isn’t a story of revenue loss. It’s a story of profit pool leakage. Walmart generated approximately $713 billion in revenue in fiscal 2026, but its operating income was a relatively modest $31.1 billion. The margin percentage is thin because its sales mix is dominated by low-margin groceries and essentials.
The opportunity cost is immense. Let’s assume a Walmart grocery shopper spends $100 weekly. The profit on that basket might be a few dollars. If that same shopper also spends $100 monthly on higher-margin general merchandise from Amazon, the profit on that basket could be 3-5 times greater. Over a year, Amazon is capturing the profit from hundreds of dollars of high-margin spend per Walmart grocery household. This dynamic helps explain why Amazon captured 9.3% of total U.S. retail spending last quarter, compared to Walmart’s 7.8%, its widest first-quarter lead on record.
While Walmart's grocery traffic sustains its scale, Amazon's model layers high-margin services, advertising, marketplace fees, Prime subscriptions, onto its logistics framework. Walmart’s challenge is to attach similar high-margin streams to its own gargantuan traffic flow, a struggle we've seen play out in other sectors, like when financial giants try to embed themselves in digital shopping journeys, as with Synchrony Hijacks ChatGPT Shopping Convos for Credit Offers.
Walmart’s Legacy: A Supercenter Is Hard to Turn on a Dime
Walmart’s physical scale is both its greatest strength and its most significant strategic rigidity. Its over $483 billion in U.S. net sales provides unmatched purchasing leverage. Its vast store base doubles as a nationwide fulfillment network. This infrastructure is a moat, but it's a moat around a low-margin kingdom.
The tension is operational and psychological.
- Operationally: Pushing higher-margin general merchandise in-store requires inventory, floor space, and a retail presentation that can compete with Amazon’s infinite digital shelf. It can feel cluttered and inefficient.
- Psychologically: For decades, Walmart trained consumers to see it as the destination for value. Amazon trained consumers to see it as the destination for everything else. Changing deep-seated brand habits is harder than building a new app.
Walmart’s initiatives, Walmart+, a growing third-party marketplace, the Walmart Connect advertising business (now generating over $6 billion annually), and OnePay financing, are all attempts to build digital bridges off the grocery island. The question is whether these tools are compelling enough to redirect the “order” mindset back into Walmart’s ecosystem.
Stakeholder Views: From Bentonville to Seattle
The Walmart Strategist’s View: The playbook is omnichannel integration. Use the grocery trip as a trigger. The Walmart app must recommend a patio set when a customer buys charcoal. Walmart+ must offer benefits beyond free shipping, perhaps bundling discounts on high-margin categories. The store must become a showroom for items best ordered online for pickup later. It’s about creating a seamless loop: grocery trip → app notification → Walmart.com purchase.
The Amazon Strategist’s View: Treat Walmart stores as lead-generation hubs. Optimize mobile advertising to target users geographically near Walmart locations. Highlight Prime benefits like fast, free delivery on the very items a shopper just saw in Walmart’s aisles but decided to “think about.” Amazon’ goal is to own the “second thought.”
The Investor’s View: The pressure is on margin mix. As one analysis notes, Walmart’s “competitive advantages exist, rooted in scale and infrastructure. But whether that advantage expands or remains stagnant will depend on how well the company executes” in higher-margin segments. Investors will listen to this week's earnings call for evidence that initiatives in advertising, marketplace, and membership are moving the consolidated operating margin needle. Stability is not enough in a market where, as recent Retail Earnings Unmask a 0.6% Consumer Spending Drop, every dollar of discretionary spend is fiercely contested.
The Shopper’s View: They are ruthlessly pragmatic. They feel no channel loyalty. Walmart is for replenishment. Amazon is for inspiration and selection. Their loyalty is to their own convenience and wallet. They’ve already voted.
The Path Forward: Beyond Checkout Counters and Into Wallets
For Walmart, winning this battle means the fight moves from checkout lanes to mobile screens and subscription loyalty. It’s a software and data challenge, not a real-estate one.
The store’s role must be reimagined. It is not the final destination for everything. It is a hyper-efficient distribution node for groceries and a tactile, trusted touchpoint. It should facilitate digital discovery. Imagine scanning a barcode on a floor-model grill in the garden center and having it scheduled for driveway delivery via Walmart.com the next day.
The ultimate test is habit formation. Can Walmart make its app and ecosystem as instinctual for general shopping as its stores are for weekly necessities? This requires a level of personalization and integrated convenience that currently defines the Amazon Prime experience. It means owning the customer relationship digitally at the moment of intent, not just physically at the point of grocery sale.
Prediction: The Grocery War Is Just the Opening Salvo
The next phase of this conflict will be defined by ecosystem integration, not category dominance.
Watch for Walmart to aggressively bundle. Expect Walmart+ to evolve beyond a shipping perk into a gateway for exclusive deals on furniture, electronics, and apparel, directly tied to a member’s grocery purchase history. The app will become more aggressive with post-visit recommendations.
Watch for Amazon to test further physical incursions. Its experiments with Amazon Fresh grocery stores and its acquisition of physical footprints are not just about selling lettuce. They are about applying pressure on Walmart’s core fortress, gathering more data on offline shopping habits, and creating another touchpoint to capture the full basket.
The endgame is not Walmart “winning” groceries and Amazon “winning” general merchandise. It’s about which company can most seamlessly, and profitably, stitch both halves of the modern consumer’s life together. The metric for Walmart’s success is no longer just same-store sales growth or grocery market share. It’s the share of wallet captured from its own grocery customers and the margin percentage on that total relationship. The earnings call this Thursday will be a test of whether Walmart is merely presiding over a stable, low-margin kingdom, or actively building bridges to a more profitable future.
Disclaimer: This XOOMAR analysis is for informational and educational purposes only. It is not financial, investment, legal, tax, or professional advice. It does not provide buy, sell, hold, price-target, portfolio, or personalized recommendations. Verify information independently and consult qualified professionals before making decisions.
The Bottom Line
- Walmart's grocery dominance brings massive weekly traffic but low margins, putting pressure on its overall profitability.
- The widening gap between Walmart's 'trip' and 'order' category shares shows Amazon is winning higher-margin spending beyond groceries.
- Thursday's earnings will test whether Walmart can monetize its grocery traffic to boost margins or remains trapped in a low-profit volume game.
Originally published on XOOMAR. For more news and analysis, visit XOOMAR.
