Part 1: What will it take for Walmart to win? - Episode 229

INTERVIEW WITH RUSS DIERINGER

DESCRIPTION

In today’s podcast, we are talking with Russ Dieringer, our recurring special guest. Walmart has had ample opportunity to be a meaningful challenger to Amazon, but their marketplace is often not the place that most brands consider investing in after Amazon. Russ and Kiri dive into why that is, what value prop Walmart currently offers, and what it would take for them to win the ecomm marketplace game.

Make sure you tune in to find out more!

Russ Dieringer is the founder of Stratably, a company dedicated to elevating the digital IQ of leading consumer brands. Each week, Russ creates impactful, practical, and easy to digest research that speaks to all layers of an organization, helping them see further around the corner of what’s coming in retail.

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“Could Walmart be a real partner to these social platforms in order to help facilitate commerce and create a win-win for both of those companies? That’s a big question.”

— Russ Dieringer

KEY TAKEAWAYS

Ironically, a lot of merchants and brands are cheering on Walmart, in a bid to create more competition in the ecommerce marketplace world.
Walmart may have been the most obvious contender to challenge Amazon’s dominance of ecommerce, but there are now category-specific players like Instacart who are providing a great value prop for brands who want to use paid search ads to get in front of customers.
Pretty much all of Bobsled’s clients are selling on Amazon. The second-biggest channel is Instacart, and then Walmart.
Walmart’s digital business is operating at a large scale, just not relative to Amazon:
- Growth perspective
  - Walmart is 10 to 15% the size of Amazon’s business in the U.S. market
  - Walmart’s growth spiked higher than Amazon’s during the pandemic. However, a lot of that was driven by Amazon being out of stock. The deceleration has been greater as well in the last four quarters
- Marketplace perspective:
  - Walmart is at 170 million items on the marketplace, and the company thinks they can get to 200 million by end of the year. For reference, Amazon’s assortment is around 350 million.
  - A lot of the growth there has been fueled by WFS, its FBA-like fulfillment service.
- Advertising perspective: Walmart Connect is at $2.1 billion which is pretty meaningful. For reference, Amazon is at $31 billion.
Product assortment and ad revenue are not the best proxy of who’s winning, but how do you measure catching up?
- We sort of hunt for this “who will win” narrative, but Russ believes that there is a lot of space for both.
- From a digital sales perspective, Walmart probably won’t catch up, but on the other hand, when you look at their total GMV, it's Walmart and Amazon at that scale. So part of this is how you measure and think about the dimensions of competition.
- On the ad side Walmart will have a hard time reaching Amazon’s scale. But, if they can turn 2.1 billion in ad dollars into 10 billion or 20 billion, that’s really meaningful to their bottom line. As WM has merged digital and physical operations, and merchants are encouraged to try to drive the digital business, they’re being asked to invest a certain amount in Walmart Connect. Manufacturers are still going to invest, looking at the big picture of their business with Walmart.
What are Walmart’s strengths?
- In Walmart’s omni model, low ASP items can still be sold online, which is challenging on Amazon. WM can list, promote and drive growth of those products because of the in-store pickup.
- Physical stores can be used as distribution points.
- Potential for closed-loop reporting can unlock more dollars.
- Walmart initially had more exclusive seller requirements (potentially more trustworthy than Amazon) but this seems to have changed recently. Amazon has a reputation of often selling inferior quality products.
- Being a ‘challenger’ - not being Amazon can be an advantage
- Walmart’s assortment is broad, not category focused, unlike Instacart, for example.
What would Walmart need to do to win outside of advertising capabilities?
- Simplify the experience for brands - right now, suppliers are having a heck of a time on Amazon as Vendor Managers are being cut back, which may be a good opportunity for Walmart.
- Social commerce integrations - this could be the next big thing, and the platforms may see Walmart as a more acceptable partner.