The Supply Side: Walmart Media Group buildup is timely

In recent years, Walmart has poured money and resources into growing its media group or advertising arm. Investment retail watchers say it is timely, and the retailer said it helps suppliers see improved returns on their promotional ad spend.

“Connecting brands with millions of Walmart customers every day — that’s what we do at Walmart Media Group. … Advertisers can meet customers where it matters the most — at the point of sale, helping them purchase great products that will save them money and help them live better. As a result, we have increased our net new advertisers by more than 40% this year [2020] while delivering measurable improved Return on Ad Spend [ROAS] for them,” Richard Lehrfeld, general manager at Walmart Media Group, recently noted in a corporate blog.

Heading into 2021, Lehrfeld said Walmart Media Group continues to focus on the evolving needs of busier-than-ever American families amid the coronavirus pandemic while continuing to build advertisers’ trust and deliver strong results to them.

Retail watchers largely support retailers’ efforts to expand media advertising businesses within their organizations.

“Walmart and other retailers are focusing on full-platform monetization these days, not just selling products,” said Carol Spieckerman, CEO of Spieckerman Retail. “I see little risk in suppliers supporting Walmart’s ad platform, except that doing so will wick dollars away from others vying for the funds. As I tell my supplier clients, supporting retailers’ internal media, data and advertising efforts should be a top priority.

“Retailers wouldn’t invest in these capabilities if they didn’t expect suppliers to tap them. Suppliers that proactively look for opportunities to utilize retailers’ internal media and data hubs deepen their relationships with those retailers and create more unified consumer engagement and outreach. It’s a win all around.”

Scott Benedict, director of retail studies at Texas A&M University, said Walmart’s move to grow its advertising business makes a lot of sense because it has a somewhat captive audience in its vast supplier base, access to 200 million shoppers each week in its stores and a growing omnichannel reach.

Walmart said customers conduct 185 searches per second on Walmart.com, and e-commerce growth has exploded amid the pandemic. Walmart said it grew online sales by 79% from the prior-year period in its fiscal 2021 third quarter, which ended Oct. 30.

Benedict said benefits to suppliers like consumer packaged foods companies that access Walmart Media Group’s self-service platform include targeting promotional spend where it has the most impact.

“As consumers have become more digital in their shopping behaviors, it makes it harder for suppliers to reach them with new product information using old methods like circular advertising or buying an end cap displays at stores,” Benedict said.

He said earmarking some of the advertising budgets with Walmart is how CPG companies can promote products that are bought online and perhaps picked up at stores. He said Walmart is more discerning about the banner ads and sponsorship than other retail competitors.

“Walmart insists the products promoted with banner ads and other premier spots are among the best items available in a category. They are particular and do not sell ads that promote defective rated products. It’s not just about the ad revenue. Walmart seems to care about the quality of products promoted on its site with ads,” Benedict said.

From the retailer’s point of view, Benedict said it’s a way for them to monetize their traffic, and it can be a revenue source for the online business to help it become profitable. Walmart said its advertising partners program launched in January 2020 grew to half of its sponsored product ads revenue by the end of the year.

Analysts said Walmart Media Group’s success at adding new advertisers indicates that its introduction of a self-serve ad portal at the beginning of the year likely helped more marketers get a foothold on its platform. The retail giant rolled out an application programming interface (API) for its advertising partners program and opened its digital inventory to automated online auctions, giving marketers and agencies more flexibility in their media buys. Walmart also rolled out performance dashboards that provide suppliers tools to analyze data about the display and sponsored product campaigns in stores and online.

While the pandemic did not create the omnichannel customer, this shopping segment has been crucial to retailers’ success in 2020 during the health crisis. Best Buy, Kroger, Target, CVS and Walgreens have created media networks to sell advertising in recent years.

Benedict said retailers expanding their advertising services is a natural evolution as more retail goes online. He said suppliers typically had separate advertising budgets that have been split between brand marketing and item promotion. He said even brands with more mature direct-to-consumer marketing strategies could benefit from advertising directly with the retailer.

He said suppliers who hope to grow their online or in-store business with Walmart would need to look at earmarking some of their marketing spend with the retail giant. He said it might seem like a bit of “pay to play,” but the benefits are likely worth it. Lehrfeld said Walmart Media Group had made strides in being a chosen partner for advertisers beyond performance marketing campaigns.

“As we tackled advertisers’ needs in 2020, we found solutions to meet their challenges and help them meet their goals by being relevant and authentic in how they show up in the market. We broadened our social impact by partnering with leading brands such as Unilever and Cottonelle, creating campaigns that could help communities in need through initiatives like United for America, the Crown Act and #sharesquare. We’re proud to utilize our advertising platform as a catalyst for action by tapping into our omni-data to help drive meaningful conversations — not just measurable conversions,” Lehrfeld said.

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