While Amazon's reported sales growth each quarter includes that taken in from its other businesses, such as Amazon Web Services, the company is expected to capture nearly 5 percent of total U.S. retail sales by the end of this year, according to eMarketer. The data marketing firm has predicted Amazon will end 2018 capturing about 48 percent of U.S. e-commerce sales, or $252 billion, compared with 43.1 percent in 2017.
Some people have said Amazon gets a pass from investors on the investments it's made to grow sales, such as acquiring grocer Whole Foods. Analysts say investors are less concerned about Amazon turning a profit and care more about top-line growth. Traditional retailers such as Walmart and Target, however, continue to be punished by investors for announcing initiatives that drag on earnings.
Target offered the perfect example of that Tuesday, when its shares fell more than 10 percent after third-quarter earnings missed Wall Street expectations, thanks to increased transportation and labor costs, as e-commerce sales swelled. It was on track to lose more than $4.4 billion in market value.
Target said third-quarter digital sales climbed 49 percent, the best since the company started breaking out that metric. It said digital now accounts for 6 percent of its total sales, up from 4.2 percent a year ago, with stores making up the rest. It hasn't offered an outlook for e-commerce sales for the fourth quarter but said it expects profit margins will continue to be under pressure during the holidays, thanks to heightened supply-chain expenses.
Walmart doesn't say what percentage of its total sales are coming from its websites, but it said during the latest quarter digital sales grew by 43 percent. Walmart expects to finish the year with e-commerce sales growth of 40 percent. Some of that growth can be attributed to the retailer's recent string of acquisitions of smaller online brands, including Jet.com, Bonobos, Modcloth and Moosejaw. Investors still want to see these deals pay off, however, and to see Walmart keep the momentum going.
"Some people are worried that this is as good as it gets," Telsey Advisory Group analyst Joe Feldman told CNBC. "Comparisons are also getting tougher going forward."
As Walmart's e-commerce sales continue to climb, delivery and other expenses will continue to weigh on margins, unless Walmart can find a way — like adding more private labels — to make up for that. Walmart's $16 billion acquisition of Indian e-commerce company Flipkart has also hurt profits in the near term.
The day Walmart reported third-quarter earnings last week, its stock dropped about 2 percent, shaving roughly $5.83 billion in market value, as the company's estimated full-year earnings would be between $4.75 and $4.85 per share, which implies fourth-quarter earnings of between $1.24 and $1.34 per share. Analysts surveyed by Refinitiv were calling for earnings per share of $1.34.
With its growth, however, Walmart is poised to overtake Apple to become the third-biggest U.S. retailer in terms of e-commerce sales by the end of this year, eMarketer said. The firm has predicted Walmart will capture 4 percent of all online retail spending in the U.S. this year, or $20.91 billion.
"Amazon remains the king of e-commerce and is in no danger of losing its crown anytime soon," said eMarketer analyst Andrew Lipsman. "But online competition from brick-and-mortar retailers is heating up and Amazon has felt more of a need to respond to maintain its leadership."
Overall, U.S. e-commerce sales are forecast by eMarketer to climb 16 percent in 2018 to $525.69 billion, making up 9.8 percent of total U.S. retail sales.