Big Box Goes Hybrid as Omnichannel is the New Black

While DisCo recently branded digital the “unsung hero” of small business, that doesn’t mean the bigger competition has eschewed it. On the contrary, big box retailers are leaning hard into digital tech as well, illustrated most recently by Walmart’s push to expand in-store advertising.

As CNBC notes:

 “…up until recently, retailers, including Walmart, have largely focused on selling online ads and steered clear of adding digital signs or flashier ads to the places that draw higher traffic and drive the vast majority of sales: Their own stores.” 

But no longer. And it appears to be working.  Walmart’s move is part of a larger strategy that led to a more than eightfold increase in impressions over the course of 2022. Walmart has so far profited from this ad innovation to the tune of $600 million between 2021 and 2022 and is only further expanding its initiatives in the ad sector with approximately 170,000 digital screens across its locations as well as 30-second radio spots that can target specific regions for more accurate ad direction.

Walmart isn’t the only retailer attempting to innovate through digital technologies. BJ’s Wholesale Club recently partnered with Microsoft to create its own ad experience, BJ’s Media Edge. Dollar General is expanding its media network, DGMN, to better engage with its customers in rural areas. Kroger and Shoprite, like Walmart, are adding screens to their stores. These retailers are all working to improve their offerings through a combination of increased advertising and retail functionalities designed to better serve the customer.

This isn’t an entirely new phenomenon – the convergence of advertising and retail has been apparent for several years – but this data underscores just how rapidly that change is occurring. Target’s Roundel digital ad service announced in 2019 hit $1 billion in revenue in 2021, and is projected to exceed $2 billion in the near future. Kroger saw $150 million in operating profit from its ad divisions in 2020 and 2021, and its ad division topped $1.2 billion revenue in 2022. Amazon’s ad business has grown from $12.6 billion in 2019 to $37.7 billion in 2022. Retailers are increasingly competing at scale in the advertising space, and reporting successful financial results from doing so.

There is a strong global dimension to this convergence of advertising and retail. Chinese retail giant Alibaba has grown its ad revenue from  $28 billion in 2020 to $35 billion in 2021 to $41 billion in 2022, while Chinese social media giant Bytedance, which controls Tiktok, reportedly made $44 billion in ad revenue in 2022, more than all Chinese television stations combined. Bytedance is also in the process of expanding advertising through a new retail marketplace in TikTok. These Chinese retail developments impact U.S. retail, because Chinese-owned mobile apps now comprise many of the most popular retail apps by downloads and usage in the United States: Temu and Shein were the most downloaded retail apps in the U.S. in the first quarter of 2023, and Alibaba appeared in the top ten for the first time in Q4 2022 and remained there in Q1 2023. Overall, China-based publishers accounted for 54% of all downloads for the top ten U.S. retail apps in Q1 2023. 

Digital tech is facilitating increasing competition in the already highly competitive retail space, as incumbents enter and aggressively compete in the advertising space and foreign retailers increasingly compete in U.S. markets. Research shows that online stores and retail apps compete directly with brick-and-mortar retailers – for example, prices charged by brick-and-mortar retail channels tend to correspond closely to those charged online – so this entry will benefit consumers across the retail industry through lower prices and diverse venue options.

Given the highly competitive nature of retail, entrants are increasingly compelled to innovate to meet customers’ changing demands. Regionally, nationally, and internationally, new ad practices provide one more method to make offerings stand out to customers seeking competitive prices, choice, and convenience.  The trend shows no sign of abating, meaning that retail consumers can expect an increasingly competitive and digitized experience, no matter where they shop.