Part 2: What will it take for Walmart to win? - Episode 231

INTERVIEW WITH RUSS DIERINGER

DESCRIPTION

In today’s podcast, we are continuing our conversation about Walmart with Russ Dieringer. We are talking about the place Walmart has in the marketplace ecosystem, how brands look at it, what we see them working on as well as what they’ll need to do to continue staying relevant.

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.

“Walmart’s team really deserves recognition for its vision and how it communicates that vision publicly.”

— Russ Dieringer

KEY TAKEAWAYS

Walmart Connect and Walmart Luminate - plays at monetising Walmart’s digital traffic, what Walmart’s peers, like Kroger, would call alternative profit streams.
- Connect - Walmart’s advertising business. Previously they had worked with Triad, but decided to move its retail media operation in house a few years ago. They offer:
  - Paid search - sponsored products performance ads, brand amplifiers (what Amazon calls sponsored brands)
  - Programmatic - the Trade Desk is powering this; just started testing in Q4 with top 20 advertisers.
- Luminate - Walmart’s data business, a data product that merchants and suppliers can tap into. Merchants are being trained on it now, it hasn’t been fully rolled out.
  - There are three different components or modules, to help with category planning, assortment optimization, trade planning, etc.: shopper behavior, customer perception and channel performance.
  - It is unclear that this data is truly differentiated from what suppliers can already get from third-parties, so Walmart will need to demonstrate it.
  - For now it’s free, but there may be a charge in the future.
In some recent research, Russ noted that Walmart could afford to be complacent with their ad product because many brands are required to spend a certain amount of their GMV on ads. The complacency can creep in because they can secure ad dollars without needing to demonstrate a great ROI.
Part of the power in a really impactful Walmart ad business is that you can do digital activations that drive digital as well as in-store initiatives, which is the theoretical outcome.
Right now, large and medium-sized consumer brands are making Connect investments partially to protect their physical store distribution. They might not think the ROI is necessarily there, but they also might just accept a sub-optimal ad return right now because they like the full picture that Walmart offers. So its stores are impacting digital advertising spend.
There are several things that can be done to improve the situation:
- Usable, reliable reporting and attribution is a must - you want to be the leader in helping brands; in the current program it’s difficult to suss out the returns, so making that easier would help.
- Develop use cases for smaller brands - there is a $100k minimum range for Programmatic, with a $30k minimum opportunity recently on offer. Allowing for smaller brands to participate would only increase the marketplace.
- Continue to improve functionality - recently launched keyword bidding recommendations, alerts around budgeting, bid multiplier capabilities; on-site display is still clunky; CTR is not great.
- They also need to be careful on fines, like OTIF - as those are quite expensive, that hurts brands’ ability to spend in other areas.
- Spending media budget and resources on a platform that still operates a 1st price auction model as a liability for the rest of Walmart’s system, at least for mid-market brands.
- Marketplace sellers are deprioritized and have less ability to compete with 1P vendors.

Looking at the big picture:
- Walmart’s team stands out among omnichannel peers in terms of how consistent they are in communicating a digital-first vision.
- A question of how much time and energy is spent around balancing physical stores vs. digital commerce. How much does that slow them down?

About Stratably - it’s about 5 months and the response has been great. Sign up at stratably.com and check out the content. Future research: one of the big topics, a key theme throughout the year, is going to be the intersection around retailer media, social commerce, and the organization.