More of Walmart’s future profitability is likely to come from advertising sales on Walmart.com and from fees it collects from merchants who use its online marketplace and delivery services, the chief financial officer said.
“Today, the vast majority of our total profit is attributable to physical stores in the US,” said John David Rainey, Walmart’s CFO, at a Raymond James Conference.
“If you fast-forward five years, we’re much less dependent on that as a revenue stream than some of these other high-growth parts of our business.”
Third-Park Vendors
Services, such as the fees Walmart collects from third-party sellers on Walmart.com, the discount it gets when Walmart fulfills those orders for customers, and the dollars advertisers spend through Walmart’s growing retail media business, are the higher-margin, faster-growing parts of Walmart’s business. Rainey said.
Over time, they will change the composition of Walmart’s profit and loss statement, he said.
Retailers ranging from Amazon, Target and Walmart Inc to grocers such as Tesco are working aggressively to attract major advertisers to their websites. Amazon recently reported $11.6 billion (€11.0 billion) in revenue from its advertising business in the fourth quarter.
Walmart Connect
Walmart’s retail media company, which was rebranded as Walmart Connect in 2021, offers brands advertising space in its U.S. stores and allows the use of customer data to make ads more effective even on websites and apps that Walmart doesn’t own.
The company has grown rapidly since then, with sales up nearly 30% to $2.7 billion (€2.56 billion) in the fiscal year ended January 31. In the fourth quarter, ad sales were up 41% year-over-year, the company said last year. month.
Walmart, the largest retailer in the world by revenue, has also invested heavily in building out its third-party marketplace at Walmart.com, which currently offers more than 400 million products, according to Rainey.
“The more viewers come to your digital platforms, the more advertisers are willing to spend,” Rainey said, adding that advertising margins are typically in the 70% to 80% range. In contrast, Walmart’s margins fell nearly 1 percentage point to 24.1% in the last fiscal year.
“The common thread running through all of these companies is greater digital engagement with our consumers,” said Rainey, who took over as CFO in April last year.
“Convenience…really resonates with consumers, and it allows us to have these points of distribution as consumers become more e-commerce-inclined over time. They are all strongly interrelated.”
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