A Walmart executive describes plans to use advertising to build an Amazon-like flywheel

Dallaire joined Walmart in October 2021 with a robust tech background; he previously was Instacart’s chief revenue officer for two years. Prior to that, he was at Amazon for eight years and led its global advertising sales and marketing teams. He previously worked at Yahoo and Microsoft. At the conference, Dallaire provided a look into how the retail giant’s ecosystem of services works together in a way that’s not unlike some of the tech companies he previously worked for.

Sitting in the shadows of Amazon’s growing ad business, Walmart has been expanding in the space since rebranding its retail media network to Walmart Connect in 2021. Amazon built its business on the idea of a flywheel: it has multiple components that bring customers and brands in, and as it grows, it reinvests to grow the business and bring costs down. Walmart, by contrast, has traditionally grown by being a retailer.

Now, it’s adding more services and investing heavily in them.

“Advertising enables discovery of new product categories, it enables better purchasing for customers, better awareness about what’s available and at what price, so we’ll continue to invest there,” Dallaire said.

Walmart Connect’s year-over-year growth has climbed over the last few quarters, from 22% at the end of last year to 26% in first-quarter 2024 to 30% in the second quarter, per financial reports. The company has not disclosed the size of its global advertising business since the end of last year, when it reached $3.4 billion — a fraction of Amazon’s $47 billion in ad revenue last year.

Dallaire also said that while there many other retailers are adopting media networks, few, if any, have the same scale as Walmart both in physical stores and online that is attractive to advertisers. Walmart has had an advertising business for years. In the last few years, however, the retailer brought its ad capabilities in-house, building its own technology with bigger investments and serving placement to advertisers itself rather than outsourcing that to third parties, according to Dallaire.

“That’s an important distinction from the past,” Dallaire said. “We’re talking to [advertisers and suppliers] directly. We sit with the merchant teams and the store-operator teams within the home office in Bentonville so that we can have a more complete look at the relationship, the size of the relationship [and] the tenor of the relationship that we might have with a supplier partner.”

Boosting other parts of the business

Dallaire explained how Walmart’s advertising business can be an accelerant for other fast-growing segments of its business, namely, its online marketplace and its first-party data platform.

The company’s global e-commerce sales surpassed $100 billion in 2023, a first for the superstore. However, as Walmart brings on more sellers, the company knows it is critical for those sellers to be in front of the customer when they are searching for products.

“You can load in as much inventory as you want into a marketplace, but if you’re not turning the inventory, you will quickly lose the attention of that marketplace seller community,” Dallaire said. “Having advertising capability for the marketplace seller, so that they can, in fact, introduce the product to the customer or drive the sale is also a critically important part of the business, so the two are very tightly coupled.”

Just as Dallaire explained that its retail advertising can help boost the marketplace, he said growing the marketplace can help another growing part of the business, its subscription service Walmart+ — which provides free shipping from stores as well as other benefits such as video streaming and other discounts. While customers may turn to Walmart for grocery delivery, they may also need a phone charger, T-shirt or air mattress on a whim; those could come from marketplace sellers.

“If we can compete with assortment and we bring that assortment forward in a way that reinforces our everyday-low-price positioning, then we think we have a really compelling offer for membership and just for e-commerce at large,” Dallaire said.

Some advertisers want to know how to manage their ad investments so they’re not advertising in places where the product is sold out and create more awareness where the product is available — that’s where the data platform, Walmart Luminate, and the advertising business may be able to work together.

“Those are the types of couplings and bridges we’ll build between the two products so that when we’re working with the supplier, they can see inventory change position based on investments they may be making in advertising,” Dallaire said.

Differentiating its flywheel

While Walmart is clearly replicating parts of Amazon’s model, Luminate brings into its own flywheel a service more akin to Kroger’s Precision Marketing or 84.51, said Bryan Gildenberg, founder and CEO of Confluencer Commerce

“The evolution of a retailer’s economic model is such that they are going to make a decreasing amount of their money from buying and selling stuff and an increasing amount of money from selling other things,” he said. “Those other things might be services to consumers, but increasingly, those other things are also services to businesses, the brands that sell to them.”

Brad Jashinsky, director analyst of digital marketing for Gartner, said that while Walmart has created an array of services similar to Amazon, it has also catered to its own strengths in retail. Having a successful brick-and-mortar business has allowed Walmart to move cautiously, he said

“Digital, although very important to them, is not an end all, be all,” Jashinsky said. “I think they’ve done a really nice job of slowly improving the technology, doing acquisitions when necessary to be able to bring in that technology and also building those capabilities in house.”

At the conference, Dallaire said that while these new businesses may create new revenue for Walmart, it is focused firstly on the customer and will invest those funds into areas that will benefit their experience — reinforcing low prices, adopting new technology or boosting the logistics network.

“Shopping with Walmart is all about everyday low prices, and as long as we’re reinforcing that behavior with our customers and that position in their mind, then we think we’re set up for the future, and these businesses are critical to enabling that.”