Walmart Amazon whole paycheck

Walmart Earnings Provide New Insight Into Digital-First Economy

Walmart Digital Sales

Walmart will lay claim to its share of the U.S. consumer’s whole paycheck on Tuesday (Nov.17) when it announces its Q3 earnings. Analysts expect another jump in overall revenue, which is par for the course this year for Walmart and Amazon – but outside of the actual numbers, there are several trends and initiatives that will be addressed within the earnings announcement and subsequent analyst call.

The first is Walmart+. Don’t expect the company to break out actual membership numbers, but expect an expansion of services within the program, perhaps the rollout of grocery delivery to more cities or new social commerce initiatives as Walmart prepares for a possible TikTok integration. But while Walmart will probably shy away from specific numbers, PYMNTS research has not.

An exclusive research project from PYMNTS shows that Walmart could leverage its new membership model to capture more of the consumer’s whole paycheck. A study of a census-balanced sample of 2,165 consumers conducted Oct. 27-28 of this year reveals that roughly 17 percent of U.S. consumers report having a Walmart+ membership, just a bit more than a month after its launch. That compares to 68 percent of consumers who report belonging to Amazon Prime — a program that launched in February 2005 and now counts 150 million members globally. Of that 17 percent with Walmart+, 15 percent are consumers who already had an Amazon Prime account and about 2 percent of them did not.

Seventeen percent is a good number for a program that lacks a streaming and entertainment option (at least currently). It will be interesting to see if Walmart breaks out revenue from the program. Amazon does not specifically break out its Prime revenue. PYMNTS measures it under “subscriptions and other” revenue, which includes advertising on its site.

“Walmart has been thinking about opportunities outside its traditional retail business as it looks to double down on high-growth opportunities. It has sold off slower-growing businesses and pursued new avenues with its TikTok bid. It could even get into advertising, bolstered by its increased technology spending and eCommerce presence and partnerships,” according to an earnings preview in Barron’s.

The more Walmart shifts to eCommerce, the more attractive its advertising prospects and ancillary revenue will become. Brands want to be as close as possible to the “moment of truth,” which is that interval between considering a purchase and actually pulling the trigger. According to eMarketer, brands will spend $17.37 billion on advertising on eCommerce sites and apps this year, up 38.8 percent from 2019 — a spending boost driven by COVID-19. By the conclusion of 2020, eCommerce advertising will comprise 12.2 percent of the country’s digital ad dollars, eMarketer reported.

Amazon has taken a good percentage of that number. Its Q3 earnings were driven in part by a 51 percent increase in advertising revenue, netting $5.4 billion in revenue – up from $3.6 billion in 2019.

Of course, another key trend to watch is Walmart’s ability to continue to capture the digital shift and grow in the digital-first economy. Its U.S. eCommerce sales increased 74 percent year over year in the first quarter and 97 percent in the second quarter. Can the retailer replicate that? Year-over-year it can – it’s highly probable that Walmart can beat the YOY level of 97 percent. The quarter-to-quarter increase is the number to watch: Comparing the quarters will most likely show that consumers are returning to Walmart stores instead of shopping online. After all, the Walmart+ program is a hybrid. It moves shoppers online to register for the program and subsequently to use online grocery, but it also encourages in-store visits by promoting its scan-and-go payment capacity.

Judging by its recent announcement that it will adjust the operations of its distribution centers to increase its eCommerce capabilities, Walmart is clearly looking to capture more digital business and is concerned that it will need those DCs to pack and ship on time. The company announced on Thursday (Nov. 12) that it will create areas inside 42 of its warehouses – called “pop-up eCommerce Distribution Centers” (eDCs) – to fill growing online orders.

Walmart said it expects up to 30 percent of its holiday volume to be shipped from the new pop-up eDCs.

“The flexibility to pop up an eDC anytime our supply chain network experiences peak demand allows us to deliver for our customers when they need us the most, all the while consistently following the health and safety measures we have had in place for months,” said Greg Smith, executive vice president of supply chain for Walmart U.S.

——————————

NEW PYMNTS STUDY: ACCELERATING THE REAL-TIME PAYMENTS DEMAND CURVE – NOVEMBER 2020

About: Accelerating The Real-Time Payments Demand Curve:What Banks Need To Know About What Consumers Want And Need, PYMNTS  examines consumers’ understanding of real-time payments and the methods they use for different types of payments. The report explores consumers’ interest in real-time payments and their willingness to switch to financial institutions that offer such capabilities.

TRENDING RIGHT NOW