Walmart’s Growing Advertising Business: A New Revenue Stream
Walmart, the world’s largest retailer, has recently reported a surge in sales of household items such as clothes, groceries, and toys. However, what caught the attention of many was the significant increase in profits, driven in part by a product that doesn’t fit into a shopping cart: advertising.
The retail giant has a long history of purchasing ads in various mediums such as newspapers, television, and online platforms. Now, Walmart is venturing into a new territory by selling airtime to other advertisers, positioning itself as a competitor to traditional media companies for marketing dollars.
The Rise of Retail Media
Walmart’s US ad business, Walmart Connect, is part of an emerging industry known as „retail media.“ In this industry, big retailers like Walmart and Amazon leverage their position as gatekeepers between vendors and consumers to sell advertising space to brands looking to gain a competitive edge. According to Emarketer, US spending on retail media is projected to exceed $54 billion by 2024, up from $18.7 billion in 2020.
While Amazon is expected to dominate with a 77% market share, Walmart is making significant strides, capturing 6.8% of the market with ad revenue of $3.7 billion. In its recent earnings release, Walmart disclosed that its US advertising business had grown by 30% in the past year, outpacing the overall growth rate of the company.
The Profitability of Advertising
Advertising is proving to be a lucrative business for retailers like Walmart, with profit margins far exceeding those earned from selling merchandise and groceries. With Emarketer forecasting the retail media industry to reach $130 billion in four years, store chains are rushing to capitalize on this opportunity and compete with their ecommerce rivals.
One of the key advantages that retailers like Walmart have over traditional media companies is access to valuable consumer data. By tracking consumer behavior and purchase patterns, retailers can offer targeted advertising solutions that deliver measurable results for brands.
Walmart’s Advertising Strategy
Walmart is doubling down on its advertising efforts with a planned $2.3 billion acquisition of Vizio, a connected TV maker. Vizio’s technology allows for targeted advertising based on viewership data, presenting a new revenue stream for Walmart.
Unlike Amazon, Walmart’s vast network of 4,600 big-box stores and Sam’s Club outlets provides a unique advantage in reaching a massive audience. By leveraging data from customer purchases and interactions with ads, Walmart can offer advertisers valuable insights and attribution metrics that traditional media cannot match.
The Future of Retail Media
As retailers like Walmart and Target continue to expand their advertising offerings, there are concerns about the impact on brands and consumers. Brands may feel pressured to invest in advertising to secure shelf space in retail stores, while consumers may become overwhelmed by coordinated campaigns that follow them online and in-store.
Despite these challenges, Walmart is committed to ensuring that its advertising efforts enhance the shopping experience for customers. By offering targeted and relevant ads, Walmart aims to provide value to both brands and consumers while driving revenue growth in its advertising business.
In conclusion, Walmart’s foray into the advertising industry represents a significant shift in the retail landscape. With the potential for substantial revenue growth and a competitive edge over traditional media companies, Walmart is poised to become a major player in the evolving world of retail media.
