Should CPG Brands Shift Their Advertising Spend to Walmart?
Despite being the largest retailer in the United States, Walmart’s CEO once told investors that the company’s advertising business is “tiny.” According to a recent report, U.S. digital advertising revenue grew 21.8 percent last year, totaling $107.5 billion for 2018. Currently, the Olympic podium winners of digital advertising revenue include Google, Facebook and Amazon, which collectively own about 60% of the market share.
Several analysts are predicting the triopoly’s market share will grow in the coming years, so Walmart decided it needed to take its previously outsourced online advertising sales function in-house under Walmart Media Group. With already tight operating margins getting tighter as the competitive landscape heats up, Walmart knows that it needs to grow this area of the business sooner rather than later. The main question is if Walmart can be aggressive enough to encourage a shift in advertising spend from some of its biggest CPG suppliers.
This article explores the advantages and disadvantages of CPG brands shifting their ad spend to Walmart from Google, Facebook and Amazon.
You might be surprised to learn that the number of Americans who visit Walmart’s 5,000 retail locations each month outpaces monthly traffic to online giants such as Google, Facebook and Amazon.
This large customer base and associated purchase data has always given Walmart a dominant share of the estimated $178 billion that’s spent annually on in-store promotions and coupons in the United States, but the recent decision to consolidate its advertising sales for stores and websites creates a compelling differentiated advantage. This advantage surrounds Walmart’s ability to track purchases in an omnichannel retail world.
According to Stefanie Jay, VP and General Manager of Walmart Media Group, Walmart will now be able “to help brands understand if someone saw their ad on Walmart’s platform or across the internet, and then purchased the product in-store or online.” Walmart Media Group believes there is no other retail partner that can give that level of marketing and purchasing data, and it’s hard to argue with the logic, as CPG products are still bought mainly in stores and Walmart is the largest physical retailer in America.
Marketing White Space
The growth of Amazon’s advertising business could be seen as a positive in Walmart’s quest to persuade their suppliers to shift a larger portion of their yearly advertising budgets to Walmart Media Group. With ad dollars funneling into Amazon, higher customer acquisition costs will likely follow in highly competitive CPG categories.
Many CPG categories already battle slim margins online, so increasing customer acquisition costs can make for a bleak e-commerce profitability outlook. To combat this scenario, CPG marketers must search for marketing white space on other websites outside of Amazon. The best situation for brands is the continued development of Walmart Media Group, as they’re the ones that stand to benefit from the increased competition for their ad dollars.
Selling ads that target customers is more important than ever for retailers, but Walmart is behind in the race. According to recent reports, Walmart is estimated to only monetize 1% of the searches on its site, compared to Amazon’s 16%. To catch up, Walmart is expanding its in-house ad technology and resources by acquiring startups like Polymorph Labs. A key part of the acquisition is a self-serve interface that will make advertising easier for thousands of brands and will deliver more relevant ads to consumers.
Amazon Wins Initial Product Searches
When an online shopper is looking for a product, studies have shown that approximately half of them start their search on Amazon. With that many online shoppers using the site as their primary destination, Amazon product listings have become a second website for CPG brands. Shoppers now use Amazon as a resource for product research, reading content, user reviews and Q&As and looking at photos. This forces CPG brand marketers to spend a large portion of their advertising budgets to capture those initial product searches.
While this can be concerning for Walmart, not all hope is lost, as its share of product searches is growing 3.5 times faster than Amazon’s (though from a smaller market share base). Walmart’s size creates a superior position to take both mindshare and market share in popular CPG categories such as grocery. Based on recent OneSpace consumer search insights, Walmart captured over 60 percent of the total search volume for milk, eggs and bread, indicating that a majority of online grocery shoppers are turning to Walmart for these staples.
Walmart might be the largest U.S. retailer, but it lacks the diversity of in-house marketing levers compared its advertising competitors with impressive ecosystems. Google, Facebook and Amazon provide CPG brands a plethora of options, including search ads, retargeting ads, psychographic targeted ads, voice marketing, YouTube and Facebook video ads, and YouTube TV and Amazon Prime Video ads. These varied marketing levers allow brands to create plans that focus on certain brand- or sales-orientated parts of the sales funnel.
Walmart understands these limitations, but it has instead mostly worked through strategic partnerships to enhance its short-term capabilities. Walmart’s strongest strategic partner is Google. In 2017, the two mega companies partnered on voice-based shopping through Google Express and its Home devices. That initial partnership recently grew to include grocery shopping with Walmart Voice Order, which works across all Google Assistant-powered platforms, not just Google Home. Additionally, Walmart is working on plans to better utilize its acquisition of video service Vudu. According to Walmart, Vudu is the third-largest video service behind Apple and Amazon.
When it comes to digital marketing, CPG brands must uphold a balanced yet comprehensive strategy across retailer and social media advertising platforms. While paid marketing should be a key part of any brand’s strategy, those advertising campaigns will underperform if your online listings aren’t optimized for search and conversion. To achieve maximum success – whether on Walmart or other online retailers – you need high-quality product content that drives both visibility and sales.
OneSpace Can Help
OneSpace’s suite of tools and services helps brands centralize, optimize and publish product content that wins top position on multiple online retailers at scale. Contact us to learn more.