Three e-commerce predictions for a Walmart investment in TikTok

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Three e-commerce predictions for a Walmart investment in TikTok

By Dan Berthiaume - 09/25/2020

If a deal is struck allowing TikTok to continue operating in the U.S., Walmart will likely serve as its exclusive digital commerce provider.

While an agreement that would see both Walmart and Oracle take minority ownership shares in a new business providing TikTok services to the U.S. has received tentative approval, it is still far from certain this deal will come to fruition. 

However, most experts believe that at some point, the U.S. and Chinese governments will come to a mutually acceptable arrangement. Assuming a deal involving Walmart will take place sooner rather than later, let’s look at what may (and may not) result for the discount giant.

A new audience – and influence
TikTok is a hit with the oh-so-popular millennial and Gen Z consumer base. According to comScore, more than 60% of the short form video platform’s 100 million active U.S. users (as reported by TikTok) are between the ages of 10 and 29. This, in turn, has spawned a whole class of young social influencers who use TikTok to earn money by promoting certain brands.

Walmart, which already uses TikTok as a branding tool for young consumers, would obtain a trove of previously unavailable, highly valuable, and near-real-time data into the preferences and behavior of millennial and Gen Z consumers. In addition, Walmart could create integrated promotional campaigns with TikTok influencers that could help build some of the hip cachet major discount rival “Tar-jay” carries.

More Marketplace, fewer problems
A probable side benefit of gaining new insight and exposure to younger shoppers will be a surge in third-party retailers who want to sell to this new clientele via Walmart Marketplace. In this way, Walmart could quickly ramp up an inventory of products and brands desired by millennial and Gen Z consumers while avoiding much of the legwork and ongoing investment of money and effort which would otherwise be necessary.

Walmart’s recent decision to partner with Goldman Sachs in launching a new credit program designed to help Marketplace sellers quickly come to market would also prove timely in this scenario.

Walmart’s e-commerce game will be impacted, not changed
Despite these positive results for Walmart if it takes a stake in TikTok’s U.S. business, I don’t expect this to be a game-changer for Walmart’s digital commerce program. Amazon will still have much broader inventory (even in the event of a surge in new Marketplace sellers), better technology infrastructure, and a large jump-start in tailoring promotions to young consumers.

Walmart does have a better distribution infrastructure than Amazon. But it is also worth noting that to date, social selling has not dramatically taken off. Business Insider estimates social commerce will represent 4.5% of overall e-commerce revenue in 2020, growing to 7.8% by 2024. This is a healthy growth rate, but not one that will produce an overnight change in Walmart’s digital commerce fortunes.


[Editor’s note: I would like to thank Folio:magazine for giving this column honorable mention in the category of business-to-business overall column/blog in this year’s Eddie & Ozzie Awards, which celebrate editorial and design excellence in print and online publishing. I do my best to provide interesting insight and analysis on a weekly basis, and hopefully will live up to this recognition.]
 

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