Walmart’s latest earnings report showcased a surge in sales across various household items, from clothes to groceries and toys. However, what truly propelled its profits forward wasn’t a tangible product on the shelves. Instead, it was the intangible world of advertising that played a significant role in Walmart’s success.
-
Emergence of Retail Media
- Walmart Connect, the retailer’s US ad business, is part of a budding industry called "retail media."
- This new realm sees large retailers like Walmart leveraging their position as intermediaries between vendors and consumers to sell advertising space.
- Emarketer predicts that the US spending on retail media will reach over $54bn by 2024, signifying a substantial growth from $18.7bn in 2020.
-
Walmart’s Advertising Climb
- Despite Amazon’s dominance in the retail media space, Walmart has made significant strides, capturing 6.8% of the market with ad revenue of $3.7bn.
- Walmart reported a 30% growth in its US advertising business, outpacing the company’s overall growth rate.
- Investor Excitement and Expansion
- Investors have taken notice of Walmart’s foray into advertising, driving a 38% increase in the retailer’s shares this year.
- With the retail media industry projected to hit $130bn in a few years, conventional brick-and-mortar chains like Walmart are eager to seize a piece of the lucrative advertising pie.
Ryan Mayward, Walmart’s senior vice-president of retail media sales, highlighted the unique advantage of retail media over traditional advertising platforms. Unlike general search engines, retail media allows Walmart to track consumer behavior beyond just clicking on an ad, offering a more holistic view of the customer journey.
Walmart’s recent acquisition of Vizio, a connected TV maker specializing in targeted ads, demonstrates the retailer’s commitment to its advertising venture. The strategic move aims to capitalize on Vizio’s technology that monitors viewer habits, providing a personalized advertising experience.
Mayward emphasized the unparalleled advantage derived from Walmart’s extensive physical presence – over 4,600 big-box stores nationwide – which Amazon cannot replicate. Furthermore, Walmart’s ability to connect customer purchases with viewed advertisements through data analytics points towards a future where advertising efficacy is closely tied to sales attribution.
As Walmart advances its advertising efforts, the retailer also seeks to integrate digital advertising within its physical stores. Mayward highlighted the deployment of digital screens at various store sections to create new advertising opportunities that complement its online campaigns.
In a landscape where big retailers are vying for a slice of the advertising market, the relationship between brands and retailers may witness new challenges. As consumer marketing executives consider retail media spending to bolster partnerships, concerns arise regarding the potential repercussions on advertising effectiveness and customer response.
In this evolving advertising landscape, Walmart is cognizant of the delicate balance between engaging customers through ads and overwhelming them with intrusive promotions. Mayward emphasized the importance of ensuring that advertising enhances the shopping experience, adding value for customers rather than detracting from it.
In conclusion, Walmart’s expansion into the realm of advertising marks a strategic shift that promises lucrative returns. By leveraging its vast retail footprint and customer insights, Walmart is poised to redefine the dynamics of advertising in the retail industry, creating new opportunities for brands to connect with consumers in innovative ways.
