“Today, the vast majority of our total revenue comes from brick-and-mortar stores in the US,” Walmart CFO John David Rainey said at the Raymond James conference.
“Fast forward 5 years, we are much less dependent on this source of income than some of the other fast growing parts of our business.”
Services such as the fees Walmart charges from third-party sellers on Walmart.com, the share it receives if Walmart fulfills those orders for shoppers, and the dollars advertisers spend on Walmart’s growing retail media business are more profitable and fast growing. . part of Walmart’s business, Rainey said. Over time, the composition of Walmart’s income statement will change over time, he said.
Retailers ranging from Amazon, Target and Walmart Inc to grocers such as Tesco Plc are actively working to attract big advertisers to their websites. Most recently, Amazon revealed $11.6 billion in revenue from its advertising business in the fourth quarter.
Re-branded as Walmart Connect in 2021, Walmart’s retail media business offers branded ad spaces in its U.S. stores and lets you use your shoppers’ data to improve ad performance, even on websites and apps that Walmart doesn’t own.
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Since then, the business has grown rapidly, with sales up nearly 30% to $2.7 billion in the fiscal year ending January 31st. In the fourth quarter, ad sales grew 41% year-over-year, the company said last month. Walmart, the world’s largest retailer by revenue, is also investing heavily in building its third-party marketplace at Walmart.com, which Rainey says offers more than 400 million items right now.
“The more visitors that come to your digital platforms, the more advertisers are willing to spend money,” Rainey said, adding that ad margins typically range from 70% to 80%. By contrast, Walmart’s margins fell nearly 1 percentage point to 24.1% in its most recent fiscal year.
“The thread that connects them all is a greater digital engagement with our consumer,” said Rainey, who took over as chief financial officer last April.
“Convenience… really resonates with consumers and it allows us to have these distribution points as consumers lean more towards e-commerce over time. They are all very interconnected.”