Walmart Investor Snapshot: Retail Media as Biggest Untapped Opportunity
In the last two weeks, Walmart revealed a bit more post-earnings call information that I wanted to highlight for everyone. It was covered at the Oppenheimer Consumer Growth event on Jun 9th. Here are a few items:
How was Q2 for Walmart?
Q2 Off to a Great Start
- March actually was more in line with what we expected. And then, with Easter moving to April, we saw really strong performance around that, and we're off to a good start this quarter.
How are tariffs impacting Walmart's inventory?
Tariffs Causing 20% Less Inventory Depth in Some Cases
- For high AUR, tariff-sensitive items, they are buying less into the selection depending on price/demand elasticity. Barbecue pits were one example mentioned as as much and 20% less was a number called out. It's really here that Walmart sophistication shines in my view.
What's the trend for General Merchandise sales?
General Merchandise Dragging
- Consumers still prioritizing food. Continued slugging rebound.
Is eCommerce profitable for Walmart?
eCommerce Profitability Accelerating
- Hit major milestone last quarter: eCom profitability. Overshadowed by tariff news.
- Doubled # deliveries under 3 hours in last year. This is a premium/paid service. Some weeks this Express service is 40% of deliveries. Very material.
- Key factors to profitability: two-thirds of profit growth coming from alternative revenue streams, such as advertising, membership, marketplace, data, and premium Express shipping, improving last-mile batch density.
- Advertising is one of the biggest unlocks. (According to my research, Walmart media is 3x less penetrated on a GMV basis relative to Amazon).
- Vizio acquisition accelerates our ad revenue because we don't need to carry the item in our marketplace to advertise it.
How does Walmart view its different revenue streams, especially regarding advertising?
These last two points are critical to how Walmart and most retailers need to see the universe.
- First-party retail is one level. And you can sell ads against that, sell data streams, and there is premium fulfillment revenue you can generate.
- Third-party marketplace is another level, and there are multiple revenue streams here.
- "Pure" advertising is another level. Literally selling anything against content people are watching on devices that are powered by Walmart's media network. This potentially has a much larger surface area than Marketplace 3P items.
What are Walmart's future acquisition plans related to advertising?
Based on these comments, we have not seen the last of Walmart's acquisitions in electronics and connected device space. Walmart will continue to look for more ad inventory that is not tied to fulfillment an item itself, or even through one of its marketplace partners.
Expert Consulting: How Will You Grow Your eCommerce Company?
When growth is elusive, I am an expert at asking incisive questions to surface the real issues and then present straightforward ideas that your team can actually implement.
Mistakes are expensive. They cost money, of course. What’s worse is the opportunity cost. I work with investors and management teams worldwide to help them get a handle on their digital business plans to execute a clear path forward.
