Walmart is considering buying TikTok, the Chinese-owned app and social media platform.
While it may not seem to make sense at first, the idea is part of Walmart’s restructuring as a more digital-oriented enterprise.
Walmart is by far the America’s largest retail chain, with more stores selling more stuff than anyone else – revenue for 2017 was more than $500 billion. The second largest, Costco, generated $130 billion in the same year, while Amazon’s were almost $120 billion.
But take away Walmart’s brick-and-mortar or in-store sales and what you’re left with is an online retail operation that is dwarfed by Amazon, by most accounts the largest online retailer in the world.
Moreover, social and economic trends arguably favour Amazon because an ever-increasing number of people are shopping online, and coronavirus has caused a sudden steepening of that upward direction.
Another interesting aspect is the advertising revenues that retailers earn from manufacturers who often place promotional material inside stores and on websites.
Anyone who’s visited Amazon’s website recently would have noticed that there are far more “Sponsored” labels on products in almost every category.
Walmart has far less such promotions and, therefore, earns a lot less from that side of the business.
According to Business Insider, “Amazon still gets as much as 90 percent of ad budgets, while Walmart has yet to work out some of its kinks and catch up to Amazon’s sophistication”.
This is something Walmart wants to change and its reported interest in TikTok could fit into that plan because a large proportion of the app’s 800 million active users purchase items through it.
Another related initiative Walmart has unveiled is its new advertising platform, which basically works like ad networks offered by Amazon, Google and Facebook.
More than 60 percent of the revenues from the global online advertising market in 2019 went to just two companies – Google and Facebook.
Being able to offer a content distribution platform like TikTok would give Walmart’s ad network the kind of boost that very few other initiatives could.
The other, perhaps most critical, piece in the newly emerging Walmart jigsaw is its investments in robotics and automation.
The company may or may not have learned things from what Amazon has achieved by using robots in its warehouses, but anyway it’s invested in warehouse robots of its own – Alphabot being one example – and is already using driverless delivery vehicles provided by Udelv and possibly others.