The 3 Top Reasons Walmart Wants a Piece of TikTok
Walmart is considering a joint bid for TikTok and there are three key reasons that TikTok’s viral video factory would accelerate sales for Walmart.
1) The rise of social commerce: The intersection of social media and shopping is becoming a bigger piece of the e-commerce equation. Absorbing TikTok “would enable Walmart to protect itself from newer growing social media marketplaces like Facebook/Instagram and other e-commerce rivals such as Amazon,” according to Barclays analyst Karen Short. Facebook’s focus on social commerce is already showing results. 23% of U.S. Instagram users reported making a purchase on Instagram vs. 15% in late 2019, according to an RBC survey.
New sales channel: Purchasing TikTok would allow Walmart to build out its marketplace and directly promote its products to TikTok’s 50 million+ daily active users in the U.S. UBS analyst Michael Lasser emphasizes that Walmart needs to strengthen its marketplace and advertising strategy in order to “tap into these profit pools to offset the dilution from shifting more volume through eComm.”
Live streaming: Barclays calls live streaming “the crucial piece of the eCom jigsaw puzzle,” and points to growth in China as a precursor to what could happen in the U.S. Live streamed commerce in China tripled in 2019 to account for about 4.5% of total online retailing, according to iResearch.
2) Data on younger demo: Walmart is underpenetrated with the 35 years and younger demographic, a group TikTok U.S. has successfully captured. Access to this data could help Walmart better-curate items for both brick-and-mortar stores and its online marketplace.
Counterargument: One could argue that TikTok’s userbase is too young and doesn’t align with Walmart’s core customer. 18 million of TikTok’s 49 million U.S. daily users are age 14 or under, and 11 million are classified as being of unknown age, according to the New York Times.
3) Ad business: In addition to retail/eCom sales, TikTok could elevate Walmart’s ad business. Barclays emphasizes that TikTok has a goal of about $1 billion in advertising revenue in the U.S. over the next few years.
