With a Walmart store within a 10-mile dash from every consumer in the U.S., and a split-second key tap away, they have clearly established a dominant retail position, saturating most of the country physically and accelerating its growth online.

So, Wall Street says, “Great, but what have you done for me lately?” And since Walmart doesn’t rest on its laurels, their CFO, John Rainey, speaking at a recent Raymond James Conference, said, “the company expects a higher percentage of its sales and profits to shift to ad sales, third-party marketplace sellers, and B2B services.” driver of continuous innovation that elevates their value and therefore will justifies the higher fees for their new services.

We are in the early stages of a major disruption in the world of retail advertising. Amazon Advertising and Walmart Connect are the two leading forces that are fundamentally changing retail marketing communications.

New Mad Men

Advertising, or RMN (Retail Media Networks), is a recent strategy adopted by large legacy retailers, and is now beginning to accelerate. It’s a no-brainer, given the fact that ad/media agency margins are typically 70 to 80 percent, while Walmart retail is roughly around 4 percent. And since the success of advertising is measured by traffic to its stores and online, Walmart expects ad revenues to increase 42 percent in 2023 through “Walmart Connect.”

Revenue increases are also expected from Marketplace and the increasing number of third-party marketplace vendors (10,000 pre-pandemic to 150,000 at the end of 2022). The new revenues will come from the sheer number of vendors and their related fees. To serve these vendors, and as Walmart’s supply chain and fulfillment systems continue to become more efficient and effective, Walmart has been increasing vendors’ fees, for what they are calling B2B services. And, of course, its 4700 stores in the U.S. are a big driver of continual innovation, which also elevates the value and therefore, the fees for their services.

Retail Advertising Disruptors

It’s difficult, if not impossible to exclude either Walmart or Amazon in any report focused on one or the other. They are the two elephants in the room locked in battle. Just as Amazon and its digital marketplace continue to disrupt and transform the retail, legacy publishing, and broadcast industries, we are in the early stages of a major disruption in the world of retail advertising. Amazon Advertising and Walmart Connect are the two leading forces that are fundamentally changing retail marketing communications.

Ad Agency Reset

Amazon Advertising was a pioneer and now the largest mover with its own retail advertising agency business, logging in at $20.6 billion in 2022 up from $10.9 billion in 2020,.

Walmart Connect is a distant second at $2.7 billion in 2022. However, Walmart’s ad business grew a whopping 130 percent over 2020. And there are reasons to believe that Walmart’s meteoric pace will accelerate. One reason is Walmart’s sheer size and physical dominance. Each week about 220 million customers and members visit Walmart online and in approximately 10,500 of its stores and clubs under 48 banners in 48 countries. This network provides an enormous reach for potential advertisers, both online and in store. And let’s remember that behemoth Walmart serves 90 percent of U.S. households.

Another reason is Walmart’s proprietary deal with the best-in-class ad tech firm, The Trade Desk. Unlike other demand-side platforms (DSP), Walmart’s unparalleled first party omnichannel data, combined with its walled-off exclusive relationship with The Trade Desk’s superior analytics capabilities, will provide advertisers with more efficient and effective messaging — essentially deep personalization at the point of purchase.

In a recent earnings call, Doug McMillon, Walmart CEO, said that Walmart Connect is a “high margin” business that will continue to grow alongside the retailer’s Marketplace to eventually “become a top 10 ad business in the mid-term.” This is particularly important as privacy protocols are changing and the owners of first-party data will be the winners. Cookies are on their way out; new privacy regulations are being enforced, and Apple has imposed user security features to mask IP and block cookies including ads. Being your own advertising agency only makes good business sense. And above all, Walmart is invested in anticipating the future.

Walmart Connect in Poised to Outperform Amazon Advertising

Walmart may be second to develop a large-scale advertising platform, but I do believe their strategy, along with CEO Doug McMillon’s vision and commitment (confirmed by their growth trajectory), cannot be matched by Amazon.

As mentioned, Walmart Connect’s advantage is Walmart’s sheer size and reach. However, it is also their ability to gain a more holistic and deeper understanding of each consumer’s shopping behavior through data analytics from their fleet of stores., integrated with digital data. Therefore, Personalized advertising messaging can be integrated online, in store, and even adjacent to pick-up points. Walmart calls it a “closed-loop,” omnichannel media environment. Advertisers can get their messaging in front of shoppers right when they’re making purchasing decisions – anywhere in the Walmart ecosystem.

Walmart Connect’s second significant advantage over Amazon Advertising is its exclusive partnership with The Trade Desk. Walmart’s expansive, unified, first party data, including past and predictive purchases and brand-level, in-store and online shopping behavior data provide a differentiated offer to advertisers. With such closed loop reporting, advertisers can gain great clarity about the performance that their omnichannel ad efforts are having throughout all points of the customer journey, both on and offline. And at the end of the day, Walmart Connect gives advertisers a more complete picture of how specific digital and in-store ads play the greatest role in increasing sales conversions. The wealth of data insights guides strategic decisions for optimizing both current and future campaigns and determining which channels warrant the greatest percentage of an ad budget.

Just the Beginning

As for the rest of the industry, I know there are many more retail media competitors. It only makes sense that when advertising control transfers to the retailer disintermediating agencies and third-party marketers, the retailer is in direct control of the customer experience with opt-in personalized insight and intelligence.

Operating in the digital marketplace requires savvy retailers to reimagine their marketing and advertising strategies to up their games. Amazon Advertising and Walmart Connect are already ahead of the curve and the rest of the industry may be stuck playing catch-up.