The Marketplace Boom   //   September 8, 2023  ■  4 min read

Sellers are dedicating more resources to Walmart’s third-party marketplace this holiday season

Walmart’s third-party marketplace is expected to play a bigger role this holiday season.

Agency heads told Modern Retail that a majority of their clients were committing more advertising money toward Walmart’s marketplace this year. The numbers are still much smaller compared to rival Amazon, but the conversations are growing in importance because Walmart’s platform is not as crowded, relatively speaking.

And some brands are already sending in more inventory to Walmart Fulfillment Services to take advantage of its peak fulfillment fee waiver. Agency heads also said that among the new tools launched by Walmart, specifically Brand Shops and Brand Shelves were a big draw for their clients, because they will enable merchants to drive more traffic to their stores.

This shift comes as Walmart’s marketplace has grown more sophisticated. While Walmart has had an online marketplace for over a decade, it has historically offered fewer services to third-party sellers compared to Amazon. Walmart only just launched a fulfillment service for third-party sellers in 2020, for example.

But last week, Walmart held its first-ever seller summit and pushed a bunch of new tools to enable sellers to sell more easily on its platform. It also announced some perks including a waiver on peak season storage fees if sellers get holiday product into its storage facilities by October 1. Put together, all of these efforts are being rolled out with an eye on the holiday season.

“It will be a much bigger holiday season for them,” said George Hatch, director of marketplaces at e-commerce accelerator Pattern.

“This year, it feels like more brands are dedicating their own advertising budgets specifically to Walmart’s marketplace,” said Hatch. “A lot of that is because there’s opportunity for early adopters to be able to come in, as there are not as many sellers on Walmart and there are not as many sellers using advertising efficiently on Walmart.”

Walmart has also made a number of moves to grow its advertising business ever since rebranding its retail media division to Walmart Connect in 2021. Walmart’s transition to a second-price auction last year has helped sellers drive better ad efficiency and higher return on investment.

“As Walmart has invested in their advertising, a lot more sellers have adopted it and a lot more brands are using it more broadly, which is where we are at. We were using it, [but] what I’m seeing is larger budgets being dedicated towards it,” said Hatch.

Ryan Craver, founder of e-commerce agency Commerce Canal said, some of the ad tools that Walmart is offering now, “increasingly around the ad reporting, and your ability to update bids a lot more easily, is also great.”

Sponsored Search remains a core offering for Walmart Connect, but it was the rollout of Walmart’s premium keyword-targeted search ads placement, called Sponsored Brands, that helped boost the ad business. Sponsored Brands includes a brand’s logo and up to four selected products, which appears in the form of a banner ad at the top of the list of relevant search results.

Craver added more of his clients are also willingly pushing more inventory into Walmart Fulfillment Services, as they believe Walmart’s marketplace will see more demand this year. As a result of Walmart’s increased investments in its marketplace, the company said the number of customers buying items on its marketplace increased 14% in the second quarter of fiscal year 2024.

“We have communicated to our clients that we believe if you’re using WFS, that you should see an increased demand year-over-year of 20% to 30%.” And sellers are working accordingly to setup for higher demand added Craver.

Hatch said sellers have taken keenly to Walmart’s announcement to waive its peak holiday fees. By contrast, Amazon recently announced another round of peak holiday fulfillment fees, with product sizes from small to medium/large/oversize seeing fee increases anywhere of $0.20 to $2.50.

“The caveat there is a little bit earlier of a shipping deadline,” he added. “Everybody loves avoiding those seasonal peak fees. But it also is forcing sellers hands to push inventory into Walmart earlier than they otherwise might not have,” said Hatch.

Hatch said he is also seeing more brands “really looking at matching Walmart’s promotional calendar and their merchandising events to see how they’re able to get additional exposure on some of their items,” citing Black Friday and Cyber Monday as some examples.

Hatch said, in general, a lot of the sentiment he is seeing from clients is that Walmart’s seller programs are coming out of beta are finally proving to have real benefits. “Overall, it’s making it more compelling for brands to diversify and make sure that they have a presence on Walmart.”

Another way to slice and dice these changes is that Walmart is increasingly showing it is here to compete with Amazon, which generates the bulk of its revenue from its marketplace business. “They know that Amazon every year has a seller summit and that they need to have something,” said Craver.

Ultimately, Craver said, Amazon will remain the primary consideration for brands, because Walmart’s marketplace is still much smaller. “I think [Walmart] will be in second place for the foreseeable future.”