Walmart’s Rising Profits Thanks to Advertising
Walmart, the world’s largest retailer, recently reported an increase in sales of household items such as clothes, groceries, and toys. However, what really boosted its profits was its advertising business. Despite not being a physical product that can be placed in a shopping cart, advertising has become a significant revenue stream for the retail giant.
Over its 62-year history, Walmart has invested in various advertising channels, including newspapers, television, and online platforms. Now, the company has ventured into selling airtime to other advertisers, directly competing with traditional media companies for marketing dollars. This move has led to the creation of Walmart Connect, the retailer’s US ad business, which is part of the emerging industry known as „retail media.“
The retail media industry is rapidly growing, with Emarketer forecasting that US spending on retail media will exceed $54 billion by 2024, up from $18.7 billion in 2020. While ecommerce titan Amazon is expected to dominate the market with a 77% share, Walmart is projected to claim 6.8% of the market, generating $3.7 billion in ad revenue.
Walmart’s US advertising business has seen impressive growth, with a 30% increase in the past year, outpacing the overall growth rate of the company. As Emarketer predicts that the retail media industry will reach $130 billion in four years, store chains are rushing to capitalize on this opportunity. Advertising offers higher profit margins compared to selling merchandise and groceries, making it an attractive business for retailers looking to compete with ecommerce giants like Amazon.
One of the key advantages that retailers like Walmart have in the advertising space is their access to valuable consumer data. Unlike general search engines, Walmart and Amazon can track consumer behavior from ad exposure to purchase, providing valuable insights to advertisers. This targeted approach to advertising has proven to be highly effective in driving sales and engagement.
Walmart is doubling down on its advertising efforts with the planned acquisition of Vizio, a connected TV maker. The takeover, valued at $2.3 billion, will allow Walmart to leverage Vizio’s technology to deliver targeted ads to consumers based on their viewing habits. This move underscores Walmart’s commitment to expanding its advertising business and staying ahead in the competitive retail media landscape.
In addition to online advertising, Walmart is also increasing its in-store advertising initiatives. By leveraging its vast network of physical stores, Walmart can reach a massive audience of shoppers each week. With digital screens installed in various sections of the store, Walmart is exploring new advertising opportunities to engage customers and drive sales.
While the growth of retail media presents exciting opportunities for retailers and advertisers, there are also potential challenges to consider. Brands may feel pressured to invest in advertising to secure shelf space in retail stores, leading to concerns about the impact on their marketing budgets. Additionally, there is a risk of consumer fatigue from coordinated advertising campaigns that follow them both online and in-store.
Overall, Walmart’s success in the advertising space highlights the evolving nature of retail media and the growing importance of targeted advertising in driving sales and engagement. As the industry continues to expand, retailers will need to find a balance between monetizing consumer data and enhancing the shopping experience for customers.