From Cautious Consumers to Tariff Jitters: Walmart and Amazon Face Q1 Headwinds

During their respective earnings calls earlier this month, Amazon and Walmart were cautious in their first-quarter 2025 outlooks, reflecting concerns about inflation and slowing consumer spending.

Amazon’s projected revenue of $151 billion to $155.5 billion in Q1 was below the $158 billion forecast, while Walmart’s forecasted Q1 sales growth in the United States of 3% to 4% was below analyst expectations.

The retail giants attributed the weak guidance to factors like inflation, weak consumer demand and foreign exchange challenges.

Other impacting factors include tariffs and the shift in consumer focus toward essentials, which are contributing to softer demand for discretionary items.

“Uncertainty seems to be the buzzword of earnings calls,” Neil Saunders, managing director of retail at research firm GlobalData, told PYMNTS in an interview. “Going into this year, a lot of retailers are very nervous about various aspects of policy, particularly tariffs. They fear both the cost implications for their businesses and the dampening impact higher prices would have on spending. We are seeing this come out in guidance.”

To a certain extent, there will be some “low-balling to manage expectations, but there is genuine concern that demand could soften in a material way,” Saunders said. “The other problem is that planning is extremely difficult because policies keep being changed or delayed, so it is very difficult to retailers to forecast with any degree of certainty.”

As inflation continues to impact consumer behavior, it’s difficult for retailers to predict demand accurately.

“Consumers feel the pinch of inflation, shifting their focus to essentials like groceries and health products while cutting back on discretionary items like apparel and electronics,” RetailBoss founder and CEO Jeanel Alvarado told PYMNTS in an interview. “For shoppers, this means fewer splurges and more strategic spending. This behavior change has directly contributed to a ‘soft’ Q1 for both Amazon and Walmart, as demand for higher-margin discretionary goods weakens.”

Tighter budgets “mean retailers focus on more essential promotions as retailers compete for wallet share but fewer discounts on discretionary goods due to weaker demand,” Alvarado said. “Shoppers may see a stronger emphasis on value-driven marketing and loyalty programs in the months ahead.”

Here’s a look at other developments from Amazon and Walmart.

• Amazon Debuts Alexa+

Amazon debuted its generative artificial intelligence-powered Alexa+ Wednesday (Feb. 26), more than a year after announcing plans to infuse AI into Alexa. The delay highlighted the challenges tech companies face in integrating AI, despite heavy investments.

Amazon’s struggles mirror similar issues at Apple with AI features for Siri, as both companies work to enhance their virtual assistants with generative AI technology.

• Amazon Discontinues Social Commerce Feature Inspire

Amazon discontinued its social commerce feature, Inspire, Feb. 18. Inspire launched in 2022 to showcase a feed of product photos and videos similar to TikTok. The company cited a regular evaluation of customer needs and preferences for the decision.

Inspire struggled to maintain user engagement, and the shutdown comes after Amazon launched its AI-powered shopping assistant, Rufus, in 2024. Instead of Inspire, shoppers can use Rufus; search features; and AI shopping guides for product discovery.

• Increasing Demand in eCommerce

Walmart’s fourth-quarter earnings results revealed a surge in eCommerce. The company reported a 20% increase in eCommerce sales in the U.S., with store-fulfilled pickup and delivery services driving much of the growth.

“Globally, eCommerce grew 16% with penetration up across all segments,” the company said in an earnings release.

In the third quarter, more than 30% of Walmart’s online orders came with a convenience fee for expedited delivery, with some customers opting for delivery within an hour or less. As a result, Walmart saw a 20% increase in orders per delivery.

• Walmart Streamlines Post-Audit Process

Walmart is streamlining its post-audit process by moving from multiple third-party auditors to a single firm, Audit Partners Limited, starting in fiscal year 2025, Talk Business & Politics reported Feb. 13.

The change aims to increase transparency, but there are concerns about the efficiency of a sole auditor that relies on automation and outsourced workers, the report said.

Suppliers may face workflow challenges with the new web portal, High Radius. Small suppliers that don’t have post-audit teams could see unnoticed claims stack up in the portal, per the report.

Additionally, Walmart is changing how it calculates defective allowances, according to the report.

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