Walmart beefs up online media arsenal to take on Amazon as e-commerce sales top $100 billion for the first time

Stuart Lauchlan Profile picture for user slauchlan February 21, 2024
Walmart is making a $2.3 billion takeover bid on a consumer electronics firm. Why?


Walmart topped off a successful Holidays season that saw e-commerce sales soar with the announcement of a planned $2.3 billion takeover of consumer electronics firm VIZIO.

What does Walmart want with a company best known for making TVs?  An operating system and an ad business that will expand its own media business and provide another weapon in its anti-Amazon arsenal. 

As per the formal announcement from Walmart: 

The acquisition of VIZIO and its SmartCast Operating System (OS) would enable Walmart to connect with and serve its customers in new ways including innovative television and in-home entertainment and media experiences. It would also create new opportunities to help advertisers connect with customers, empowering brands with differentiated and compelling opportunities to engage at scale and to realize greater impact from their advertising spend with Walmart. The combination would be expected to further accelerate Walmart’s media business in the US, Walmart Connect, bringing together VIZIO's advertising solutions business with Walmart’s reach and capabilities. 

Walmart’s closed-loop omni-channel media business, Walmart Connect, grew 30% through fiscal year 2024. Meanwhile SmartCast has chalked up over 18 million active accounts, growing approximately 400%  since 2018, while VIZIO’s platform has over 500 direct advertiser relationships.

Walmart CEO Doug McMillon pitched the rationale for the planned takeover: 

We are really excited about the opportunity to bring together VIZIO's operating system with our ad platform…Marketplace and advertising are key drivers of profitability growth and this acquisition accelerates the buildout of our advertising platform into the connected TV business, which will be exciting. 


And that's all he was prepared to say at this point until the necessary regulatory hurdles are overcome. In the meantime, Walmart seems to have shaken off some of the Vaccine Economy doldrums it ran into last year. While Q4 net income fell from $6.28 billion a year ago to $5.49 billion, revenue was up from $164.05 billion to $170.71 billion. 

Global e-commerce sales were up 23% year-on-year, topping $100 billion in total for the first time. In the US, e-commerce rose 17%. McMillon said: 

During Q4, the Walmart US. team delivered three year high customer scores in our stores, for pick-up and delivery from stores, and for those orders that flow directly from our e-commerce fulfillment centers. I'm excited about the omni-channel net promoter score trends the team is driving. 

Expect more focus to fall on Walmart’s  Marketplace business  as McMillon stated:

We're continuing to strengthen our first and third-party e-commerce capabilities and scale those businesses around the world. The combination of marketplace and the commissions that go with it, fulfillment services, membership, advertising, and our smaller but fast-growing data monetization business enable us to grow our bottom line faster than our top line, while delivering everyday low prices for our customers and investing in our associates at the same time.

Marketplace is an engine for our business. As we've added more sellers in the US, we've seen more of them use our fulfillment capabilities. Marketplace is also the fastest growing aspect of e-commerce for us outside the US.

The AI angle

And, of course, generative AI is going to be front and center in 2024, he added: 

Our new generative AI powered search on the Walmart US app, which rolled out to iOS users last month and is coming to Android users this month, is a great example. One of those popular searches this month was, 'Help me buy a Valentine's Day gift'. And rather than searching separately for things like chocolates, a car, jewelry, flowers, the search returns a list of results that are relevant and curated. And Flipkart launched a similar generative AI search tool, which was available just in time for Big Billion Days.

Overall, McMillon reiterated Walmart’s belief that gen AI can be transformative for the retail sector: 

There are big opportunities for us to improve the customer and member experience, improve associate experiences and productivity, and help take costs out of business…Big picture, we've got a very clear plan as it relates to what we want to build versus what we want to leverage from others, and we've got good partnerships and good advisors, and we've got a strong tech team that knows what they're doing in this area. So I do expect that it'll have benefits.

As I talk to other CEOs and we learn here, I think it's still too early to try and quantify this specifically. I think as we look back on what develops, we can probably tell you in the rear view mirror how things played out from a cost perspective, for example. But the thing we're most excited about that's already happened is the way search has improved. The way generative AI helped us really improve a solution-oriented search experience for customers and members is the thing that we're most excited about and it happened pretty quickly and it impacted Super Bowl search results.

My take

My focus stays primarily on what we're building for the longer term. That future is an omni-channel one where we simultaneously strengthen our stores and clubs and build a more compelling e-commerce business.

That’s all to the good as a statement of intent from McMillon, although CFO John Rainey adds a timely reminder that the e-commerce business is still in the red: 

In terms of when we can get to profitability, we have line of sight to e-commerce being breakeven when we include all the various components of this, advertising, fulfillment services, all that together. But to be clear, we're focused on getting to e-commerce profitability even without the subsidization of those additional items. That's a little further down the road. We have a lot of work to do to get to that point.

Last year Walmart branded itself as a people-led, tech-powered, omni-channel retailer dedicated to helping people save money and live better. It’s a work in progress, argues McMillon: 

We're in execution mode and the headlines are, we believe we can grow. We’re confident in our ability to grow because we're positioned to serve customers and members however they want to be served. We can provide value and we can provide convenience. And underneath the supply chain's changing to be more intelligent, more connected, more automated. And that's just going to help us improve execution.


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