Ad buyers double down on Walmart’s retail media business as it steps out of Amazon’s shadow

“Walmart Connect’s capabilities are certainly among the best in the retail media landscape, if not, call it tied for the best with Amazon and maybe of other players in that stratosphere,” said an agency executive who oversees digital commerce and who spoke with Digiday on the condition of anonymity.

Walmart’s growth in the retail media space largely stems from its beefed-up capabilities in search and offsite offerings (such as its intended acquisition of smart TV manufacturer Vizio back in February and ad opportunities geared toward non-endemic advertisers), as well as the surge of ad dollars being pumped into the retail media network marketplace right now. And some agency execs say Walmart’s scale means brands have to play by Walmart’s rules.

“It’s just that their sheer physical and digital footprint is one that really can’t be denied,” said Bana Amare, director of activation at ad agency Media by Mother. To illustrate the point, Walmart has more than 4,600 retail units in the U.S. compared to Target’s nearly 2,000 stores.

In other words, Walmart has a massive physical presence and growing e-commerce business. For consumer packaged goods brands especially, Walmart is an important retail customer, making an increased investment in Walmart’s retail media business worth it, according to the retail media experts Digiday spoke with for this story.

“Our clients have these massive JBPs [joint business planning] with these retailers, and the audience within a Walmart is unmatched — their coverage over the country,” said a second agency executive speaking under the condition of anonymity. “It’s this behemoth where if you want to be successful, [spending with Walmart Connect] makes so much sense.”

Walmart, the second exec added, is perceived as a pay-to-play offering. The more a brand invests in its media offering, the better chance it has to unlock products on the shelf, support for in-store displays and more. Marketers have recently sounded off on the mounting pressure to spend big with retailers to secure and maintain premium in-store shelf space and other perks, and Walmart is no different. However, its size and scale prove more effective leverage than some of its competitors, execs say.

Walmart maintains that its ad and merchant businesses operate under entirely separate joint business plans. “Suppliers are not required to advertise in order to sell products at Walmart. Whether or not a supplier participates with Walmart Connect will have no impact on the Walmart Merchandising team’s strategy — including their purchase, distribution, pricing or assortment decisions,” Rich Lehrfeld, general manager and svp of Walmart Connect, said in an email to Digiday. (Lehrfeld recently joined the Digiday Podcast to talk about the expansion of Walmart’s ad business. Listen to that conversation here.)

Historically, Walmart has been willing to come across the table and negotiate other parts of the business, like in-store display opportunities or fees, as part of retail media network spend commitment negotiations, according to a third anonymous agency executive, who oversees retail media. But as Walmart grows its ad business, the retailer is taking a “more judicious approach” in the negotiation process, the third exec said.

“I’ve seen them less willing to do those kind of things, which then means they’re going to start positioning retail media as a separate thing,” said the third executive. That means if Walmart separates its advertising services from other parts of the business, its retail media arm would potentially come with more defined pricing and less flexibility for negotiations.

And, as Lehrfeld said, Walmart does separate its ad business and merchants.

JBP negotiations or not, Walmart still seems to have earned its stripes as a standout player in the seemingly never-ending sea of retail media networks. Walmart’s retail media search ad offering has piqued advertisers’ interest, with revenues expected to increase twice as fast as Target’s and Amazon’s, according to eMarketer.

Walmart also has a number of data-sharing partnerships with the likes of TikTok and Disney, allowing it to engage non-endemic brands in its retail media business. It’s also hedging its bets with offsite opportunities. Last year, Walmart partnered with NBCUniversal on shoppable ads. And let’s not forget its acquisition of Vizio. Details of that particular deal have yet to be made public, but it could add streaming capabilities to Walmart’s portfolio, which would allow the retailer to take in more brand marketing ad dollars.

“Not only have they enhanced their capabilities from the perspective of retail media networks,” said the first anonymous executive, “but they’ve also gotten to a place where they’re a legitimate player for national media and traditional performance media budgets as well.”

The exec added that clients are investing in Walmart Connect and will continue to do so, pulling from shopper marketing, e-commerce and trade marketing budgets. Mike Feldman, svp and global head of retail media at Vayner Media, made similar comment. “We are increasing Walmart faster than the rate of retail media increases. So we’re over indexed in Walmart,” he said.

The growth of Walmart’s ad business, which accounts for almost a third of the retail behemoth’s overall operating income of $6.7 billion now, is due in no small part to its growing e-commerce business. Last year, Walmart’s global e-commerce sales exceeded $100 billion. Meanwhile, its U.S. business has delivered double-digit growth for six consecutive quarters, according to the company. The bigger Walmart’s e-commerce business gets, the more web traffic, first-party data and audience targeting opportunities it can offer, which are all reasons for advertisers to shell out more for Walmart’s ad business.

While Walmart may be stepping out of Amazon’s shadow in the retail media space, it’s still not a true threat to Amazon — at least not yet. According to the industry experts Digiday spoke with for this story, Walmart is less likely to steal share from Amazon or even its competitors, and is more likely to start tapping into national brand marketing budgets. Given lagging standardization in the retail media space, each retail media network has different metric reporting and capabilities. This makes it hard for marketers to make enough of an apples-to-apples comparison to shift dollars from one platform to another, the experts said.

Increasingly, retailers have been making the ask for brand dollars, and opening up brand marketing channels like streaming. Earlier this year, The Home Depot rebranded its retail media network to explicitly make a pitch for brand marketing dollars, for example.

“To me, it’s less about growth coming from other retail media networks than it’s about Walmart playing up the funnel and taking budgets from some of those types of players,” said the first anonymous exec. Global retail media ad spend is projected to take over linear TV next year, per WARC. If Walmart’s Vizio deal says anything about Walmart’s brand marketing intentions, perhaps it makes sense.