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The Economist is generally viewed as one of the more rational and conservative among the newsweeklies that bombard Americans and citizens of other countries each fortnight. In that context, it came as something of a surprise when, in a recent issue (May 25) there appeared a Walmart story carrying this subhead: “Walmart’s latest product? Its customers.”
The article told the story of Walmart’s success in advertising to its 200 million-plus monthly customers — before they leave the store.
To document the retailer’s success in reaching its shoppers while they shop, the story made these interesting points:
• The music wafting through the store as customers shop is occasionally interrupted — by advertising spots.
• Even at the checkstands, a few final commercials pop up on video screens to grab customers — before they leave the store.
Behind this once-unprecedented activity is Walmart’s recent discovery that there is money to be made — serious money — in selling access to its customers.
Indeed, its booming advertising business helped to deliver a 9.6% increase in operating income during its most recent quarter. Though still a small percentage of the retailer’s total revenue — more than $600 billion — the $3.4 billion in revenue produced by this foray into advertising is, nonetheless, proving worth The Economist’s attention. Especially considering that estimates placed the retailer’s ad revenue at some 7.5% of total earnings, before interest and taxes, in 2023.
Still, questions remain. For one: Where is this new direction in retail going? For another: What does it mean?
To help answer the first question, it is definitely, from Walmart’s perspective, going in the right direction. Indeed, the retailer’s ad revenue is anticipated to finish the year ahead of such social networks as Pinterest, Snapchat and X. For good reason. Like so much of what Walmart does, it is well thought through.
To dig deeper, Walmart’s advertising operation, to quote from The Economist’s article, has at least three primary components. The largest of these is the digital ads that appear on the retailer’s website and app, a component that the company can monitor because it knows the products the customer is looking for and how successful its advertising has been in helping her make a decision.
The second element in its advertising program is video. Though less glamorous than, say, Amazon Prime Video, Walmart’s effort is geared toward sending personalized data on the retailer’s shoppers to such agencies as Disney’s streaming services.
The third step, apparently still being debated, might well be, again according to The Economist, “shoppe TV,” in which audiences buy products directly through their TV sets.
Finally, Walmart might ultimately utilize its brick-and-mortar stores (more than 5,000 in the U.S. alone and 10,000 globally as advertising space). According to The Economist story, Walmart claims that 90% of American households shop its store at least once annually. That’s an audience no competitor can touch. As to answering the second question, what it means, at this point, that’s anyone’s guess. Still, at this point, it’s awfully hard to bet against Walmart in any endeavor it determines to pursue.
