"We've got a business that's becoming increasingly digital," CEO Doug McMillon said.
Walmart detailed its digital shift on its latest earnings call.
Walmart broke out advertising revenue for the first time during its latest quarterly earnings report as leaders underscored the change that has taken place in the business over the last two years.
The company said its advertising business earned $2.1 billion in revenue in 2021, and said the number of advertisers on its retail media platform, called Walmart Connect, grew 130% year-over-year.
“We expect Walmart Connect to continue to scale over the next few years, with plans to become a top 10 ad business in the mid-term,” said CFO Brett Biggs.
The move to share advertising figures follows a similar disclosure by Amazon, which revealed it had a $31 billion advertising business, which is more revenue than YouTube.
While not as large as Amazon, Walmart’s advertising business is similarly tied he company’s ecommerce activities. McMillon said the growth of the advertising business will follow as the company’s ecommerce business expands. The earnings report showed that the Walmart US ecommerce business grew 11% in 2021 and 90% on a two-year stack.
“We've got a business that's becoming increasingly digital,” said CEO Doug McMillon. “The ecommerce business, first-party, third-party is growing. It gives us the opportunity to grow advertising income. It's grown at a fast rate, and it's growing across markets.”
When it comes to third party, the company added 20,000 new sellers to Marketplace in the US last year, and expects to add nearly 40,000 in 2022.
With the growth of ecommerce, Walmart’s stores are increasingly becoming “hybrid,” as they serve both the in-person experience and ecommerce business.
“The stores are stores, but they also act as fulfillment centers…So this ability to interact with customers digitally is important. Our workforce is becoming more digital,” Walmart US CEO John R. Furner said. “We've got over 1 million associates who have a device in their hands from the minute they walk in until they leave. So that’s saving them time.”
The company also has a subscription offering called Walmart+, and is expanding both in-home and last-mile community delivery service, the latter of which will grow from 1,000 to 5,000 pickup points this year.
“Having inventory so close to so many customers is a competitive advantage. In some cases, we're getting items to customers in hours, rather than days,” McMillon told analysts.
Upping marketing spend, growing loyalty members and multichannel sales are key to the beauty brand's strategy.
Digital commerce is helping e.l.f. Beauty pour fuel on the fire.
The brand continues to be one of the shining examples of the staying power of beauty products despite consumer pullback in other areas of discretionary spend. e.l.f. grew net sales 48% in the fiscal year ended March 31 as it reached $500 million in sales for the first time. For the most recent quarter, sales grew by a whopping 78%. The company is seeing profit gains as well, as adjusted EBITDA grew 56%.
With the top-line revenue flowing, the brand was opportunistic about how it invested in marketing in the most recent quarter. After upping spend to 33% of net sales in the quarter, the company ended up with marketing and digital investment at 22% of net sales for the year. That was well above the higher end of its 17% to 19% outlook. In the coming year, it expects 22% to 24%.
The fact that digital and marketing fall in the same category reflects the brand’s approach to marketing. It's a favorite among Gen Z, and has found a home on the social apps that are popular with the generation.
“Our disruptive digital-first marketing engine has built strength across multiple social platforms,” CEO Tarang Amin told analysts on the company’s earnings call. “We are a pioneer on TikTok and are now a four-time TikTok billionaire with our last hashtag challenge garnering nearly 15 billion views. We were the first major beauty company to launch a branded channel on Twitch and the first beauty brand on BeReal.”
As a sales category, digital penetration is now 17%, growing from 14% last year. The channel grew 75% in the most recent quarter.
Amin laid out three factors driving this trend:
Marketing. The marketing investment that e.l.f. made brought strong returns, and the digital-first nature of those ads are bringing people to the brand’s digital sales channels.
Loyalty. E.l.f.’s Beauty Squad loyalty program has 3.7 million members, which is a 25% year-over-year increase. Loyalty members are the biggest driver of the brand’s digital business, accounting for over 80% of sales on the brand’s DTC site.
Multichannel. e.l.f. is the only one of the top five mass cosmetics brands that has a DTC site, Amin said. It is also seeing strong growth at Amazon and other retailer ecommerce websites. The growing presence is “building upon itself,” Amin said.
With digital growth, the brand is seeking to expand capacity in the supply chain that will provide more efficiency and faster delivery, as well. It is shifting to a more distributed ecommerce fulfillment model. Previously, it had one automated warehouse in Columbus, Ohio, which meant shipping to the West Coast could take time. Now, it is moving to a multinode distribution network. With the first couple nodes up and running, there is already improvement in delivery times.
The brand is also adding distribution capacity to its main warehouse in Ontario, California.
As marketing helps more people discover and buy from the brand, the operational improvements will help create a customer experience that lives up to the hype.
