In yesterday’s earnings report, Walmart reported a growth of 11% in their Walmart.com business, nearly 5x the growth of their overall business which saw 2.4% growth. Obviously, this came as a little bit of a surprise since most other Big Box Stores reported larger increases in-store vs online.
But Walmart’s investment into their own .com is clearly paying off. With more than 20,000 new sellers to their U.S. marketplace amidst rising inflation ensures Walmart’s status as not only the most affordable grocery center in town, but also now online.
Brands like The Gap, Hugo Boss, Betsey Johnson and others have already joined Walmart’s marketplaces club. And with the company set to add another 40,000 new sellers during 2022, I’m boldly going to predict that 2022 will become the year that serious brands start taking
Walmart.com seriously.
Let’s discuss why.
The New Hybrid Marketplace Model: Multi-Channel Fulfillment and Advertising
Walmart has been working behind the scenes for years to create their own hybrid marketplaces model, taking successful elements from both Target and Amazon to create an ecosystem that services their core customers. Through the expansion of
Walmart Fulfillment Services, Walmart allows third party merchants to enjoy the benefits of an online marketplace and as well as provide the convenience of in-store returns.
Walmart is creating the infrastructure to sell 200 million eCommerce products, not surprising since, in the earnings report, they reported that GMV delivered by WFS rose by 500% with sellers seeing on average 50% growth in sales. With their experience across stores, fulfillment centers and now marketplaces, the backend components will finally catch up to their ambitions to provide the necessary agility to serve their customers where they are.
In this current state of the retail environment, it’s increasingly more important for products to have both availability and affordability. Consumers are voting with their dollars like never before and are rewarding retailers with repeat purchases.
In addition, their advertising platform,
Walmart Connect, has grown into a $2 billion contributor for the company and is predicted to become a top 10 ad business. With typical Amazon CPC’s in the $5 range, similar Walmart placements run less than $1.50 CPC and with typically 20-30 competitors bidding on the same terms on Amazon, Walmart has barely 1-2 advertisers for those same terms.
Amazon is the marketplace giant, make no mistake. But with Amazon just now branching out to create brick-and-mortar stores in the last decade, they won’t achieve the grasp that Walmart has created over the last 60 years.
Creating True Customer Value in an Inflated Market
According to a survey conducted by CPG/grocery digital commerce platform Chicory, over 35% of shoppers say they prefer Walmart to Amazon to purchase groceries online. Up-and-coming players like Instacart or Shipt embrace a younger demographic simply because they must—Walmart has an older generational following that will stick with them through the ebbs and flows of the market.
Walmart is the top player in managing the consequences of inflation because they are an internationally known brick-and-mortar household name that focuses on rollbacks, savings, and deals.
They market to the price-sensitive audience, a type of audience that is only going to grow in numbers throughout the shadow of recession in 2022.
The cost-effective marketplace Walmart has created will steal the younger generation away from these more “hip” start-ups as they become strapped with financial burdens.
Focusing on Fulfillment During Disruption
We’ve all seen the empty shelves, the rush to buy toilet paper to no avail. But Walmart navigated supply chain costs and pandemic-related challenges extremely well as their operating expenses as a percentage of net sales were relatively flat.
Walmart Fulfillment Services is most similar to that of Amazon’s, and now that they have succeeded online, it’s a sign to vendors that they should invest their products into this reliable marketplace.
Additionally, the technology invested by Walmart creates seamless communication between their fulfillment centers and marketplace products, allowing retailers to pivot quickly and avoid that pent-up frustration consumers feel when they read “product out of stock.”
The amount of retailers joining Walmart’s marketplace is changing Walmart’s brand itself. It’s no longer a pit stop to grab some cheap groceries. It’s instead rivaling Amazon and becoming the go-to for consumers to shop quality products at a price they can afford in today’s shifty economy.
At MERGE, we are uniquely positioned to understand the nuances that differentiate Walmart from Amazon. We see our clients grow their brands through Walmart.com and reach new audiences through Walmart Connect. If you are curious about what your business can look like with a well-run Walmart channel,
let’s chat.
