Member Exclusive   //   February 22, 2024

Amazon Briefing: 3 ways Walmart is following in Amazon’s strategic footsteps

This is the latest installment of the Amazon Briefing, a weekly Modern Retail+ column about the ever-changing Amazon ecosystem. More from the series →

Earlier this week, Walmart announced its intention to acquire the TV maker Vizio for $2.3 billion.

It’s a big but not entirely surprising move — and highlights the way Walmart has transformed its growth strategy to mimic its biggest competitor: Amazon.

In the announcement, Walmart made no bones about explaining the Vizio opportunity. “We believe Vizio’s customer-centric operating system provides great viewing experiences at attractive price points,” said Seth Dallaire, evp and chief revenue officer, Walmart U.S., in the press release. “We also believe it enables a profitable advertising business that is rapidly scaling. Our media business, Walmart Connect, is helping brands create meaningful connections with the millions of customers who shop with us each week. We believe the combination of these two businesses would be impactful as we redefine the intersection of retail and entertainment.”

This acquisition news came alongside Walmart’s overall quarterly earnings report, which showcased more digital growth in the vein of Amazon. The company’s revenue grew 5.7% to $173.39 billion and same-store sales went up 4.3%. But global e-commerce sales grew 23% and its digital revenue in the U.S. rose 17%.

According to analysts and insiders, it’s more proof that Amazon has been taking detailed notes about Amazon’s rise over the last decade and creating its own similar playbook. “Walmart is replicating the [Amazon] model — and they’re doing a good job of it,” said Andrew Lipsman, an independent media analyst at Media, Ads + Commerce.

With this acquisition in mind, here’s a look at all the recent moves Walmart has made to compete with Amazon while clearly taking pages out of its competitor’s formula.

Growing the ads flywheel
The Vizio acquisition makes one thing clear: Walmart wants to boost its advertising prowess. Walmart has been growing its Connect advertising program for years now, making it the second-biggest retail media player in the space behind Amazon.

One of its big focuses over the last few years has been building a flywheel that competes with Amazon Prime. Walmart’s first major attempt at this was its introduction of its paid service Walmart+ in 2020. The uptake of this program has grown, with Insider Intelligence estimating last summer that Walmart+’s membership would surpass 29 million users.

That’s a drop in the bucket compared to Amazon Prime’s over 200 million members, but it still exhibits similar ambitions. For both services, users pay an annual fee and in exchange, get access to benefits like free and fast shipping as well as access to other paid media services.

With the rise of both of these services has come more advertising opportunities. Amazon, for example, has been building out more robust advertising units leaning heavily on its Prime video offerings, launching new types of units and campaigns aimed at getting larger advertisers to spend more on top-of-funnel campaigns.

Walmart, by contrast, hasn’t gotten quite to that point yet. It has boosted its retail media offerings, including partnerships with TikTok and Roku, as well as certification programs that aim to familiarize more ad professional with the platform.

But, according to Daniel Sodkiewicz, co-founder and CTO of the Walmart-focused agency GeekSeller, the groundwork is being laid to create similar offerings. “I really saw [the Vizio acquisition] as going towards the trend of advertising,” Sodkiewicz said. That is, Walmart will be able to advertise to Vizio’s customer base. That includes the program’s streaming service, SmartCast, which boasts over 18 million accounts.

This move, then, is another step in proving to advertisers that not only does Walmart have a growing premium membership base, but its audience beyond that is also rising. That is, not only can Walmart’s retail media network help brands sell advertising in stores and on its online marketplace, but it can begin paving the groundwork for bigger advertising plays that hit a larger audience. According to Sodkiewicz, it’s about making this pitch to advertisers “by telling them [Walmart has] a huge audience that we can market to.”

Expanding its e-commerce capabilities
The other big facet of Walmart’s growth plan is showing to brands and advertisers it has a thriving e-commerce marketplace. While its third-party marketplace has been around since 2009, over the last few years the retailer has been ramping things up.

Walmart’s marketplace currently has over 100,000 sellers, according to a Marketplace Pulse report from this past September, which is double what it was 18 months ago. Amazon, for comparison, has over 1 million sellers on its platform.

But even with the smaller merchant base, Walmart’s focus on e-commerce growth is undergirding its overall business. Global online sales grew 23% this past quarter, surpassing $100 million in revenue. And while the third-party marketplace likely isn’t the main driver of this growth, it is complementing the overall strategy.

The intentionality with growing the e-commerce marketplace side is likely by design. According to one estimate, nearly 20,000 new sellers attempted to join Walmart’s marketplace per month last year and “at least 10% eventually got approved by Walmart and became active,” wrote Marketplace Pulse.

The idea, it seems, is to focus on quality and scale with the brands available. While they are pushing for more sellers, “they don’t just let anyone join,” said Sodkiewicz. “Walmart takes this slowly, they are still pretty picky.”

Focusing on distribution and shoppable TV
Perhaps the biggest strategic similarity between Walmart and Amazon is the focus on reaching a massive audience beyond the confines of their retail businesses. Like Walmart with this Vizio purchase, Amazon has seen connected TV as an important entryway.

While Amazon has had its Fire TV for over a decade, it first began selling advertisements off of its connected TV offerings in 2019. It became, according to Lipsman, “a point of integration for the content [Amazon has] with Prime Video, Freevee, Alexa.” The long-term strategy, he said, “would be around shoppable TV.”

Walmart is clearly trying to find its way into this arena as well. Vizio, Lipsman said, “gives them the hardware, the point of integration and increases the penetration of [Walmart’s] smart TV OS.” In short it gives the retail the potential to have more eyeballs for the ads and promotions it runs.

Already, Walmart has tested out shoppable programming. Just last year, it launched a romcom series that made it possible for viewers to purchase items while viewing the episodes on TikTok, Roku and YouTube.

The biggest gap in Walmart’s Amazon-like approach currently is content. It now has a piece of hardware as well as a connected platform to reach more eyeballs — but it doesn’t have the robust offerings that Prime Video currently does.

But Lipsman thinks there may be some more announcements on the horizon. “My expectation is that [Walmart] could partner and get access to more ad-supported content,” he said. “I do think Walmart has to be thinking of acquiring a content provider. All of this is basically following the Amazon model.”

Amazon news to know

  • Adweek reports that Amazon is planning on sunsetting its Freevee program as it focuses more on its offerings for Prime Video. Amazon, however, denies the reports.
  • Amazon is about to launch an online store in India focused on fashion, TechCrunch reports.
  • Amazon is joining the Dow Jones Industrial Average, replacing Walgreens.

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