Retailer wants to be a bigger player in digital ads, spurring
its joint bid with Microsoft for video app
By Sarah Nassauer
This article is being republished as part of our daily
reproduction of WSJ.com articles that also appeared in the U.S.
print edition of The Wall Street Journal (August 29, 2020).
Doug McMillon has worked to remake Walmart Inc. since becoming
its chief executive six years ago. He has all but stopped building
new U.S. stores, spent roughly $20 billion on e-commerce startups
and retreated from Brazil and other countries.
The 53-year-old's latest gambit would be the farthest departure
from the company's traditional roots, trying to turn one of the
world's biggest social-media apps into a Walmart storefront.
Walmart said Thursday it was making a joint bid with Microsoft
Corp. for TikTok's U.S. operations, the popular video-sharing app
that is facing a potential ban in the U.S. from the Trump
administration over national-security concerns. TikTok is owned by
Beijing-based ByteDance Ltd.
The retail giant wants to use TikTok to sell products to U.S.
consumers spending hours swiping through goofy videos of dance
routines, lip-syncing and pranks. But Walmart also wants to be a
bigger player in digital advertising. It could use TikTok's
audience to sell ad space to other companies, mainly its own
suppliers, according to people familiar with the operation.
Last year, the company announced plans to create a
digital-advertising network that would compete for marketing
dollars with Amazon.com Inc., Google and others. Walmart brought
its digital-ad sales unit in house and hired ad executives to sell
space on walmart.com.
The retail giant hopes that the marketing chief of a large
branded manufacturer can "now think about Walmart as a network I
can go advertise on," Steve Bratspies, then-chief merchandising
officer for Walmart U.S., said last year. Mr. Bratspies is
currently the CEO of Hanesbrands Inc.
Those efforts are born out of a fear of Amazon's financial
model, which earns the bulk of profits from computing services and
selling advertising. It uses those profits to partially fund costly
superfast shipping on a nearly endless array of products sold
online, eating into Walmart's share of retail sales.
Mr. McMillon bought e-commerce startup Jet.com in 2016 for $3.3
billion to advance its own online shopping service and put founder
Marc Lore at the head of Walmart's U.S. e-commerce business. Then,
Mr. McMillon paid $16 billion in 2018 for control of Flipkart
Group, an Indian e-commerce startup that Amazon also pursued. He
has explored other ways to tap its stores for revenue, such as
rolling out health-care clinics and exploring a potential
cloud-computing service.
With a stake in TikTok, Walmart could grow its e-commerce
business, expanding product sales through the social-media app or
promoting walmart.com.
A purchase would put Walmart and Microsoft in direct competition
with Facebook Inc. and other social-media companies working to
boost revenue by letting users shop inside social-media posts.
Facebook's Instagram is working to grow shopping through the
image-based app. Brands or people selling items can link to their
shopping websites through Instagram, and the social-media network
also lets shoppers who share a payment method buy products directly
in the app. The seller ships the products to the buyer, not
Instagram.
"The lines are blurring between traditional shopping, digital
shopping and social media," said Michael Lasser, retail analyst at
UBS Group AG. "Walmart needs more exposure to this trend."
Walmart's stock rose 4.5% to $137 by market close Thursday on
news of the TikTok bid. There are still many hurdles to overcome
before any deal gets done and other suitors are circling
TikTok.
For Mr. McMillon, a bid for TikTok would align with many of his
personal interests and wider goals for the company, including
improving Walmart's perception among more shoppers, adding more
cool-factor and appeal for wealthier consumers. Walmart's core
customers are households earning around $45,000 a year, low-income
shoppers strapped for cash.
Mr. McMillon has long been interested in the power of
entertainment to win hearts and change minds about Walmart's brand,
as well as drive excitement about new products, according to people
familiar with his thinking. He likes to emphasize new movie
releases in stores to drive related product sales, say some of
these people.
In 1994, Mr. McMillon, then a middle-manager, wrote a letter to
an executive outlining his vision for the company, including the
growing role of technology and the increasing popularity of "video
retailing," which at the time meant TV shopping networks.
TikTok's user base skews young, even by social-media standards,
and that is surely an appeal for Walmart as it is for the app's
other suitors. But as a retailer rather than a tech company,
Walmart could face challenges in maintaining the app's knack for
innovation and edgy appeal to young people. And many teen TikTok
users have no credit cards.
A stake in TikTok would thrust Walmart into uncomfortable
territory, part-watchdog for a host of complex topics such as
sexual content on the platform, bullying through videos, and
political content online.
Not all of Walmart's digital pursuits have worked out. In 2010,
Walmart bought the Vudu movie-rental and streaming service but it
was eclipsed by Netflix Inc. and others. In April 2020, Walmart
sold Vudu to Comcast Corp. It has wound down all of Jet.com's
operations and sold off several niche e-commerce startups that it
acquired, including ModCloth and just this week Shoes.com.
Mr. McMillon, an Arkansas native and son of a dentist and a
homemaker, joined Walmart nearly 30 years ago loading trucks as a
summer job. He rose through the ranks and became CEO in 2014. He is
a technology buff with 44,000 followers on Instagram, who also
talks regularly about his Christian beliefs, weaving "God is good,"
into speeches.
Under Mr. McMillon, the company has been more outspoken than
ever before on social issues, taking a stance supporting gay rights
and limiting gun sales in the wake of a mass shooting at an El
Paso, Texas, Walmart store last year. More recently, Walmart has
highlighted racial justice after several incidents of police
violence against Black people and related protests.
Mr. McMillon has also become a leading face of American
corporations, taking over earlier this year as chairman of the
Business Roundtable, an advocacy group for business executives. He
has also developed close ties to the White House. President Trump
has praised Walmart and other big chains for helping with Covid-19
testing efforts during the pandemic.
"Although the world of social media seems a million miles away
from selling cans of soup, Walmart's interest in buying TikTok
underlines the seriousness of its digital ambitions," said Neil
Saunders, managing director of GlobalData Retail.
Write to Sarah Nassauer at sarah.nassauer@wsj.com
(END) Dow Jones Newswires
August 29, 2020 02:47 ET (06:47 GMT)
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