The Supply Side: Walmart Connect targets $6B in ad revenue by 2025

With more than 4,700 retail U.S. stores, Walmart has 139 million customers each week in stores and online. Walmart is leveraging its scale to entice advertisers who can bundle in-store and online advertising with Walmart Connect, the retail giant’s internal agency.

Shoppers nationwide can see more third-party ads on screens in Walmart self-checkout lanes and the TV wall at the back of the store. Radio ads are also part of the offering with Walmart Radio, played in stores and demo spaces where employees can give out sample items. These in-store marketing efforts can be married with several advertising options for brands on Walmart.com and its social media partners like TikTok and Facebook.

Walmart has been ramping up in-store ads using its approximately 170,000 digital screens in its stores and 30-second radio spots that the retailer can use to target a specific store or region. Walmart also sells demo stations where samples are handed out for everything from cereal bars to pizza bites and yogurt. QR codes at the demo tables allow shoppers to access online shopping options, meal ideas and seasonal information.

Walmart continues to expand advertising options for suppliers with the recent expansion of its first-to-market pilot with TikTok. That follows the roll-out of the Innovation Partner Lab in 2022, now the Walmart Connect Partner Lab. The announcement was made in a blog post on Walmart Connect’s website on Jan. 31.

“The Walmart Connect Partner Lab is where we initially tested the unique partnership between TikTok and Walmart Connect to deliver in-feed ads on TikTok. This successful collaboration has driven consumer engagement by fostering discovery and shared experiences,” the blog post noted.

Walmart said the pilot results have shown engagement rates that are two times higher compared to TikTok benchmarks, with a 3.5 times increase in attributed return on assets. The blog post noted that 79% of social media users believe TikTok inspires them to buy or try new products.

The retailer said the new offering allows advertisers to leverage Walmart’s first-party data to connect with potential customers. By tapping into TikTok’s format alongside Walmart brand equity, there is an opportunity for advertisers to increase engagement rates, the blog post noted.

Walmart Connect also recently offered a self-serve platform to all Walmart suppliers and Marketplace brand owners. The platform is Brand Shop and Shelf. The service allows brands to build virtual storefronts that tell their story, highlight specific items and expand their reach in a 24/7 platform.

“The goal of a Brand Shop is to have an always-on destination showcasing the breadth and depth of the brand. You can visit a Brand Shop via a link from the brand name on item pages,” the website notes.

Walmart said Brand Shops are configured to push feeds to Google so relevant keywords appear in the title and page headers. Suppliers can also create and manage virtual shelves under this offering.

Walmart Connect’s expected revenue for last year is $3.19 billion, with a growth potential of $6.18 billion by 2025. The service should deliver a significant new source of income with high margins for Walmart, according to Insider Intelligence, which also projects retail media as the fastest-growing ad channel across all media forms through 2027. That said, advertising is still a tiny slice of Walmart’s overall revenue of $611 billion last year.

Retail consulting firm McMillanDoolittle recently awarded Walmart Connect with its Innovation Award, noting, “Walmart Connect presents an omnichannel marketing solution that uniquely integrates both in-store and online first-party data to offer branded advertisers a holistic view of the Walmart shopper. Through its omnichannel tracking system, brands gain the ability to assess the efficacy of their advertising efforts, enabling brands to optimize their strategy and allocate resources efficiently.”

Scott Benedict, an affiliate partner at McMillanDoolittle, said Walmart’s investments in connected stores and growing online through a burgeoning marketplace, learning and redefining and testing the latest forms of technology from drone delivery to AI-assisted online search, sets them apart.

“Walmart is in a position that no one else can match with respect to physical stores, and the growth scale of online business is second only to Amazon,” he said. “The rich, granular consumer data that Walmart owns from its massive operations about consumers and how and what they purchase is unmatched. From an omnichannel perspective, they appear to be way ahead as they see digital as the front door of all commerce.”

Data from Pacvue indicated Walmart Connect recorded a cost-per-click of 67 cents in the fourth quarter, up 8% compared to the year-ago period. The increase was attributed to heightened competition among advertisers on the platform.

Brands increased their average spend on Walmart Connect by 18.47% year over year as brands expanded their campaigns. The click-through rate jumped 55% year over year. The growth indicates the positive impact of new ad placement options, such as sponsored video and ongoing algorithm improvements on the platform, Pacvue noted.

Finally, the average return-on-ad-spend decreased by 4.7% from a year ago, possibly influenced by the rise in cost-per-click results from more advertisers on the platform.

“The expansion of Walmart Connect’s self-service platform aims to eliminate barriers for brands investing in the full funnel. Walmart is dedicated to boosting confidence and visibility throughout the entire shopping journey, unlocking brand budgets in the process,” said Riku Laitasalo, head of client services at Pacvue.

Editor’s note: The Supply Side section of Talk Business & Politics focuses on the companies, organizations, issues and individuals engaged in providing products and services to retailers. The Supply Side is managed by Talk Business & Politics and sponsored by Firebend.