Written by Andria Cheng of Forbes
Retrieved from Why Walmart Wants In On TikTok
TikTok could “provide Walmart with an important way for us to reach and serve omnichannel customers as well as grow our third-party marketplace and advertising businesses,” Walmart said in a statement Thursday after reports of the partnership.
Why? E-commerce is key in Walmart’s growth strategy and in its fight against archnemesis Amazon AMZN +0.2%. With the coronavirus pandemic driving more consumers to buy online, Walmart, using its store fleet as fulfillment centers for in-store or curbside pickup and grocery delivery, recently reported that Walmart U.S. comparable sales had risen by 9.3%. Sales at its namesake e-commerce site almost doubled.
Indeed, as Amazon’s shipping and other costs have ballooned, its growing third-party seller services, advertising and cloud business are seen as profit drivers to help fund the company’s initiatives.
TikTok, more importantly, could help Walmart appeal to coveted Gen Z shoppers and bring them to shop at Walmart, both in stores and online, and keep the company abreast of what teens want.
“The potential deal is a younger customer opportunity,” Chen said, adding that TikTok has increased its monthly active users to 100 million in August, from about 11 million in January 2018. TikTok would likely help Walmart “entrench the company’s appeal to a new and younger generation of shoppers.”
In a clear sign of its advertising ambition, Walmart has created Walmart Media Group, which the company describes as “an in-house advertising offering, to work with brands to influence shoppers.” Advertising, together with the likes of fuel and financial services, represent less than 1% of Walmart U.S.’s total sales, the company said in its annual report.
“Harnessing the reach of a rapidly growing social media platform should allow (Walmart) to build links with advertisers and third-party sellers,” UBS analyst Michael Lasser wrote in a note. “The lines are blurring between traditional shopping, digital shopping and social media. (Walmart) needs more exposure to this trend.”
With many TikTok users broadcasting their hot fashion and other finds, having TikTok could also help Walmart up its game against cheap-chic rival Target TGT +0.2% when it comes to selling more apparel, beauty items and other non-essentials, which typically are more profitable than Walmart’s bread-and-butter grocery and staples items.
Walmart’s TikTok account, which has grown to more than 290,000 followers with 1.8 million likes since the retailer posted its first video in September, mostly showcases fashion, toys and DIY takes on non-grocery items. One video shows a young employee customizing a $20 black denim jacket with iron-on patches, all sold at its stores.
In another potential sign of how TikTok could help Walmart attract sellers, TikTok in July unveiled new advertising tools to help small and mid-size businesses use its TikTok For Business to grow their brand. On Wednesday, TikTok users for the first time could buy a limited fashion collection during a live stream on its platform.
With Walmart’s plan to roll out its Amazon Prime-like Walmart Plus membership, there could also be a potential for Walmart to feature TikTok as part of the membership, analysts said.
Should Walmart and Microsoft win the bid, it would mark the latest in a string of tie-ups between the retailer and the tech giant, which is competing with Amazon’s AWS cloud business. Walmart in 2018 signed a five-year deal with Microsoft to use its Azure cloud and other services. Microsoft is also an investor in India’s e-commerce giant Flipkart, which Walmart has a majority stake in after a $16 billion acquisition in 2018. The two companies also have investments in Team8, a cybersecurity think tank founded by former leaders of Israel’s top military intelligence unit.
Acquisitions, despite mixed success, have increasingly played a key part in Walmart’s growth strategy. It spent $3.3 billion in 2016 buying Jet.com and getting its cofounder Marc Lore to help expand Walmart.com before folding Jet.com this year.