• by Sarah Mahoney  @mahoney_sarah, July 2, 2024

Walmart may still be the world’s largest retailer, but a new report from Deutsche Bank says the consumer heavyweight is poised to become a non-retail powerhouse, too. While Walmart is still doing well in its core retail operations, Deutsche says it’s gathering steam from alternative value streams, which are boosting revenue and pumping up profits.

Specifically, Walmart is doing well in five pools of opportunity within the ecommerce world, including Walmart Connect, its retail media network, membership fees, marketplace transactions, fulfillment services, and data monetization. “These five value streams are fast growing with high margins, and management emphasized that these categories are key drivers in the underlying transformation of the business,” writes Krisztina Katai, an analyst who follows Walmart for Deutsche Bank.

Advertising is a significant component. “It is a $3.4 billion business growing at 20%-25% annually, with about a 70% contribution to margin. The key difference between Walmart and other digital advertisers is the ability to attribute an ad to a specific customer in both a digital and physical experience,” she says. That means Walmart can deliver a digital ad and see how it impacts customers a week later in a store. “Further, Walmart can monitor advertisements and track trends, which can be shared with brands, giving them the ability to monetize in different ways.”

At an investor meeting hosted by Deutsche Bank in Europe recently, Walmart execs said the recent acquisition of Vizio, the connected TV company, creates new opportunities for advertisers. They said they believe that the contribution of ad sales to the company’s gross merchandise volume could grow as high as 8 to 10%, which Deutsche notes is roughly in line with Amazon.

Walmart Fulfillment Services is also making strides, as are efforts to monetize its extensive data library.

The executives also indicated that its retail backbone is strong, with no significant changes in the spending confidence of its customers. “The team noted that there isn't any indication that its customer is under particular stress compared with a few months ago,” says Katai, “but that the customer has remained value-focused and general merchandise -challenged.”

Looking ahead, the Bentonville, Arkansas-based retailer says it continues to beieve that higher-income shoppers are the most significant opportunity and that this cohort is changing its perception of Walmart.

Deutsche Bank, which continues to rate Walmart as a buy, also noted that the retailer is gaining strength in private-label products, which now account for 20% of Walmart's sales and 30% of Sam’s Club's sales.