Walmart’s plan to improve margins is built on ad and B2B service sales

Walmart has a greater combination of business-building tools and access to customers than any other retailer in the U.S. The retailer plans to use those tools and that access to diversify its revenue streams and drive greater profitability going forward.

John David Rainey, chief financial officer for Walmart, speaking this week at the Raymond James Institutional Investors Conference, said the company expects a higher percentage of its sales and profits to shift to ad sales, third-party marketplace sellers and B2B services.

Walmart’s advertising success is driven by traffic to its stores, app and walmart.com.

Mr. Rainey said, “more advertisers want to spend money” with Walmart as it attracts more shoppers. He said that advertising margins typically fall in the 70 to 80 percent range and can change the composition of the company’s profit and loss statements. Insider Intelligence expects Walmart’s ad revenues to grow 42 percent in 2023.

He pointed to the fees Walmart makes from third-party sellers on its marketplace as another means to higher revenues and profits. Walmart has increased the fees it receives from third-party sellers by giving them access to its fulfillment technology and services.

Mr. Rainey also identified opportunities to partner with business customers looking to take advantage of Walmart’s scale. He pointed to the chain’s broad network of stores across the U.S., putting the retailer within 10 miles of most American households. This market saturation and the systems Walmart has developed to run its own business have put it in a position to serve as a solution provider for others.

Walmart is not alone in trying to monetize advertising and services to boost its top and bottom line performance.

Amazon.com generates more than half of its e-commerce revenues from third-party marketplace sellers. It is also the largest retail media provider and trails only Google and Facebook when it comes to digital ad sales, according to Insider Intelligence research cited by CNBC.

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